Why is the market falling when the Sensex drops 900 points and investor wealth is lost by Rs. 6 lakh crore?

The growing geopolitical tensions between Israel and Iran caused major benchmark indexes to begin on a negative note on Monday. The Nifty 50 index dropped 255 points to a low of 22.263.55 in Monday’s session, while the S&P BSE Sensex fell over 930 points in intraday trade to 73,315.16 levels. But as the day went on, both benchmarks regained some of their losses.

All listed businesses on the BSE had a fall in market capitalization of Rs 6 lakh crore, to Rs 393.77 lakh crore.

Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities, anticipates that this week’s events will keep investors on their toes and steer the market in the right direction. These events include the Israel-Iran conflict, domestic and global economic macroeconomic data, crude oil prices, and the results of the January–March quarter for Q4FY24.

According to Vakil, in the next sessions, Nifty will now go toward the next significant supports, which are 22,303 and 22,142. He said, “We expect any correction to halt at lower levels and the intermediate uptrend to resume as long as the intermediate uptrend is intact.”

Principal Causes of Today’s Stock Market Crash

Israel-Iran Conflict

Iran attacked Israel with drone missiles on Saturday night. This was in reaction to an alleged April 1 Israeli attack on its consulate in Damascus, which resulted in the deaths of seven members of the Iranian Revolutionary Guard Corps, including two generals.

As equities investors voiced fears about the fallout from Iran’s unprecedented full-scale military strike on Israel, Sensex and Nifty saw significant drops on Monday.

Worldwide Cues

Asia’s markets started the week with a cautious outlook. The broadest MSCI index of Asia-Pacific stocks outside of Japan dropped 0.7% after Iran’s late-saturday missile and drone launches against Israel.

The Nikkei in Japan fell more than 1%, while the S&P/ASX 200 index in Australia dropped 0.6%. The Hang Seng Index in Hong Kong fell 0.8%.

Treasury Yields Retain Their Latest Highs

As traders reduced their expectations for the frequency and extent of rate cuts by the Federal Reserve this year, US Treasury rates remained close to their recent highs.

The two-year yield remained close to the 5% barrier, closing at 4.8966%, while the benchmark 10-year yield was last recorded at 4.5277%.

Falls Rupee

In early trading, the Indian rupee dropped 5 paise to 83.36 versus the US dollar. The dollar index, which tracks how the US dollar performs in relation to a basket of six important international currencies, was trading at 105.94.

In the meantime, rising predictions that persistent inflationary pressures in the US would keep rates higher for longer caused the dollar to hit a new 34-year high versus the yen.

Price of Crude Oil

However, traders had essentially priced in an Iranian retaliatory assault that would probably further disrupt supply networks, so oil prices hardly moved in response to the announcement. Due to this, Brent oil futures reached their highest point since October last week, hitting $92.18 a barrel.

While U.S. West Texas Intermediate oil futures dropped around 0.6% to $85.13 a barrel, Brent was last down 0.5% at $90.01 per barrel.

Quick Technical

The Chief Market Strategist at Geojit Financial Services, Anand James, says that if the Nifty closes below 21,800 or fails to finish over 22,200, it may confirm the break of the bullish structure that had 23,200 in the distance and line up 20,300.