Sensex crashes 1,300 points, Nifty drops below 24,500; why is Indian stock market falling? EXPLAINED with 5 key factors

Indian stock market benchmarks, the Sensex and the Nifty 50, suffered sharp losses on Friday, June 13, in line with major Asian peers such as Japan's Nikkei and South Korea's Kospi, as heightened tensions between Israel and Iran spooked investors.

The Sensex opened at 80,427.81 against its previous close of 81,691.98 and dropped over 1,300 points, or 1.6 per cent, to hit an intraday low of 80,354.59, while the Nifty started the day at 24,473 against its previous close of 24,888.20 and crashed 1.7 per cent to an intraday low of 24,473.

The BSE Midcap and Smallcap indices crashed up to 1.5 per cent.

Around 10 AM, the Sensex was 907 points, or 1.11 per cent, down at 80,785, while the Nifty 50 was 269 points, or 1.08 per cent, down at 24,619.

The overall market capitalisation of BSE-listed firms plunged to nearly ₹442.5 lakh crore from ₹449.6 lakh crore in the previous session, making investors poorer by about ₹7 lakh crore in a day.

Why is the Indian stock market falling today?

Here are five key reasons that are behind the sharp selloff in the Indian stock market:

1. Israel strikes Iran, deals a blow to market sentiment

Israel launched strikes on Iran on Friday, targeting key nuclear facilities, missile factories and military sites. According to Israeli Prime Minister Benjamin Netanyahu, the operation hit the "core of Iran's nuclear enrichment programme," including the Natanz atomic facility and prominent nuclear scientists.

The tensions could escalate further and spiral into a bigger conflict in the Middle East as Netanyahu stated that the offensive against Iran will persist "for as many days as necessary.

"The economic consequences of this Israeli strike can be profound if the attack and counterattack by Iran linger long. Israel has declared that the operation will last several days," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, observed.

At a time when Russia-Ukraine tensions persist—and have even flared up recently—the Israel-Iran conflict is a fresh blow to the markets. Geopolitical tensions have emerged as a top concern for investors.

2. Crude oil prices surge over 10%

WTI Crude and Brent Crude prices soared more than 10 per cent following Israel's strike on Iran, amid concerns over supply disruptions from the Middle East. 

India, one of the world’s largest importers of crude oil, is particularly vulnerable. 

A sharp jump in oil prices is negative for its fiscal math and could reignite inflationary pressures, which have been easing lately.

3. Investors rush to safe-haven assets

Investors are dumping riskier equities and rushing to safe-haven assets such as US bonds, the dollar, and gold amid heightened geopolitical tensions.

Gold prices surged 2 per cent in the domestic futures market, while the US dollar rose over 0.30 per cent. US bonds saw an uptick, dragging bond yields. Bond prices and bond yields move in opposite directions.

4. Rupee breaches 86 per dollar mark

The Indian rupee fell 54 paise to open at 86.14 per dollar versus Thursday’s close of 85.60, further weighing on market sentiment.

The rupee's weakness can trigger foreign capital outflow, raise import costs, increase inflationary risks, and harm corporate profitability. 

5. Lingering tariff uncertainty

While the Israel-Iran episode is the immediate trigger for the market crash, lingering uncertainty about US President Donald Trump's tariff policies and growing concerns about its economic fallout keep market sentiment fragile.

While President Trump has announced that a trade agreement was reached between the US and China, pending final approval from him and Chinese President Xi Jinping, experts point out that the market appears disappointed as it expected a sweeping trade deal between the world's two largest economies.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.