Sensex settles 400 pts lower, Nifty ends near 23,900: Surging crude prices among key factors behind market fall

The stock market benchmark indices Sensex and Nifty declined on Wednesday, tracking a bearish trend in global equities and higher oil prices amid an escalation in the conflict in West Asia.

The Sensex settled 373.93 points or 0.49 percent lower at 76,570.35, while the broader Nifty declined to 23,914.45, down 141.35 points or 0.59 percent.

Key factors behind market decline

1) Surging crude prices: Brent crude, the global oil benchmark, rose 1 percent to USD 95.4 a barrel, paring some gains after hitting a near six-week high earlier in the session.

The rise came after the US said it had launched a series of airstrikes against targets in Iran overnight, prompting an Iranian response and a renewed escalation of tensions in the West Asia.

India, a major crude importer, is particularly vulnerable to sustained rise in oil prices as they can raise inflation and widen the import bill.

"The escalation of the US-Iran conflict and the consequent 5 percent spurt in Brent crude overnight to USD 96 is a sentiment negative," V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said.

2) Elevated bond yields: Global bond yields remained high on concerns over a near-term US rate hike. Higher US interest rates make emerging markets like India less attractive for global investors.

"Indian markets are likely to remain under pressure as surging crude oil prices and rising global bond yields continue to weigh on investor sentiment amid the escalating conflict in the West Asia. While India's resilient domestic growth outlook provides an underlying cushion, external macroeconomic and geopolitical risks are expected to dominate near-term market direction, keeping the broader outlook cautious," Ponmudi R, CEO of Enrich Money, an online trading and wealth-tech firm, said.

Crude oil has emerged as the key near-term risk for domestic equities, he said, adding that WTI crude has surged more than 8 percent over the past two sessions following renewed US-Iran military tensions, reigniting concerns over potential disruptions to energy supplies from the region.

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3) Weak global cues: Asian markets traded lower, with South Korea's Kospi tumbling over 3 percent and Japan's Nikkei 225 index dropping nearly 3 percent. Shanghai's SSE Composite index and Hong Kong's Hang Seng index also traded lower.

US markets ended lower on Tuesday. Wall Street futures also traded in the red, indicating a weak start for US equities.

"Wall Street closed lower on Tuesday, with the S&P 500 falling 0.7 percent, the Dow Jones Industrial Average declining 0.8 percent and the Nasdaq losing 1 percent, as rising energy prices and bond yields intensified concerns tighter monetary conditions ahead. The US 10-year Treasury yield climbed to around 4.79 percent, close to a 20-month high.

"Asian markets have followed Wall Street lower this morning as investors reassess the impact of higher energy costs alongside the broader global bond sell-off," Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, a Research Analyst firm, said.

4) India VIX rises: The India VIX, a gauge of expected market volatility, rose more than 5 percent to 11.76. A rise in the volatility index indicates increased uncertainty and caution among investors.

Among stocks, oil marketing companies such as BPCL, HPCL and Indian Oil, tyre makers including MRF, JK Tyre and CEAT, paint maker Asian Paints and airline operator IndiGo declined in trade on higher oil prices.

Bucking the trend, Coal India gained 3.6 percent after the state-owned company said its total coal supplies increased 5.5 percent in August.

The company is selling a 10 percent stake in Mahanadi Coalfields through the subsidiary's initial public offering, according to draft papers filed with the market regulator.

Technical Outlook 

Anand James, Chief Market Strategist at Geojit Investments, said "Though yesterday’s doji suggests that buying interest is very much there, the repeat attack on the 24060-24000 band has made the trend vulnerable for a strong breakdown. We had pencilled in 23575 as the objective for such an outcome, for the last one week, but we are prepared to see 23800 as the initial objective before playing the next leg. Meanwhile, 24150-24215 remains the region to overcome to signal strength."