Sensex down over 650 points today: What's the reason?
What's the story
The Indian stock market has witnessed a major slump for the second consecutive session today. The benchmark indices, Sensex and Nifty 50, fell nearly 1% each during intraday trading. Sensex fell over 650 points to an intraday low of 77,498, while Nifty fell over 200 points to around 24,266. So, why did they fall? Let's find out.
Market drivers
Geopolitical tensions in the Middle East continue to rattle investors
The Indian stock market's fall is being driven by geopolitical tensions in the Middle East and rising oil prices.
The uncertainty surrounding the reopening of the Strait of Hormuz and a possible US-Iran peace deal has investors worried.
Iran has said it won't reopen the Strait until its conditions are met, while US President Donald Trump claims his country is "in total control" of this crucial waterway.
Inflation worries
Rising oil prices reignite inflation fears
The rise in oil prices has reignited fears of persistent inflation exceeding central banks' tolerance levels, potentially leading to interest rate hikes. Brent crude rose 1% to nearly $90 per barrel today amid uncertainty over a US-Iran peace deal and attacks on two ships.
Caution
Caution ahead of US, India inflation data
Caution ahead of key inflation prints in the US and India has also contributed to the market's downtrend.
Consumer Price Index (CPI)-based inflation data for July is due in both countries later today.
These figures will influence expectations about monetary policy from the US Federal Reserve and Reserve Bank of India (RBI).
Concerns are rife that oil price-driven inflation can push them to raise rates soon if the Middle East conflict isn't resolved quickly.
Investor behavior
Profit booking across sectors amid uncertainties
Investors are booking profits across sectors amid persistent geopolitical uncertainties.
The Nifty IT index crashed over 2% while FMCG, consumer durables, healthcare, and realty indices fell over 1% each.
This is a clear indication of investors opting to take money off the table and wait for further clarity before making fresh bets in these uncertain times.