Sensex drops over 500 points: What's behind today's decline?
What's the story
India's benchmark equity indices, Sensex and Nifty, fell on Friday. The fall was mainly due to losses in financial stocks and rising crude oil prices. At around 12:30pm, the Sensex had plunged by 509.89 points or 0.65% to trade at 78,444.87 while the broader Nifty index fell below the crucial mark of 24,550 after losing over a hundred points today. For this week, the Nifty index has gained 1% while Sensex has risen by 0.8%.
Market pressures
Rising Brent crude prices add to inflation concerns
Brent crude, the global oil benchmark, has risen 1.16% to $83.45 per barrel for the third straight session.
The rise is due to fears over shipping through the Strait of Hormuz after Iran proposed restrictions on vessels deemed hostile.
This is bad news for India as it imports most of its crude oil requirements.
Higher import costs can widen trade deficits and put pressure on inflation, affecting overall market sentiment.
Investor sentiment
FIIs sold equities worth ₹17.86 crore on Thursday
Foreign Institutional Investors (FIIs) sold equities worth ₹17.86 crore on Thursday, further weighing on domestic equities.
Weak global cues also contributed to the fall, with Asian markets trading lower and US markets ending lower on Thursday.
Dow futures and S&P futures were also trading lower, indicating a weak start for US equities.
Market volatility
Bajaj Finance and Bajaj Finserv fell sharply today
Bajaj Finance and its parent Bajaj Finserv fell by 3.9% and 3.3%, respectively, pulling down the financial services sub-index by 0.7%.
The decline came after a draft Reserve Bank of India proposal that raised concerns over restrictions on certain revolving credit products offered by non-banking financial companies (NBFCs).
Meanwhile, India VIX, the market's volatility gage, rose by 3% to 12.46, signaling increased uncertainty among investors today.