Nifty 50 Plunges Below 24,400 on Heightened US-Iran Tensions

Indian Stock Market Under Pressure Amid Escalating Middle East Conflict

The Indian stock market experienced intense selling pressure on Wednesday, with the BSE Sensex declining by 1,456.79 points (1.82%) to 78,782.06, and the Nifty 50 falling by 484.85 points (1.95%) to 24,380.85. The Bank Nifty also dropped by 2.25% to 58,491.20.

Crude Oil Prices Rally Amid Supply Disruption Concerns

The escalating conflict in the Middle East has pushed crude oil prices higher, with Brent crude oil price rising by 3.05% to $83.88 a barrel, and US West Texas Intermediate (WTI) crude futures gaining 2.82% to $76.66. This surge in crude oil prices is expected to remain elevated in the near term due to concerns over supply disruptions through the Strait of Hormuz, a critical transit route for over 20% of global oil supply.

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Inflation Risks and Economic Impact

The increased crude oil prices are likely to raise India's annual import bill by approximately $2 billion for every $1 increase. This could also widen the current account deficit by approximately 30-40 basis points and raise the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) by 40 to 80 basis points. Experts warn that the impact of potentially widening trade deficit, depreciating currency, higher inflation, and lower growth is the real issue.

Sectoral Impact and Market Strategy

The sell-off was broad-based, with the Nifty Metal, Nifty Realty, and Nifty PSU Bank indices tumbling over 4% each. The India VIX, a gauge of market volatility, surged over 23%. Historical data compiled by Anand Rathi shows that during major global conflicts, the median return of the Nifty 50 during full war periods remained positive, while the median drawdown during intense phases was around 4%.

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Technical View and Market Indicators

The Sensex and Nifty 50 continued their descent below their respective 200-day moving average on account of the fluid situation unfolding in West Asia. The zone of 24,270 - 24,250 will act as a crucial support for the Nifty 50 index, while the resistance lies in the zone of 24,480 - 24,500. On the downside, if the Nifty 50 index slips below the level of 24,250, then the next support is placed in the zone of 24,120 - 24,100.

Key Market Indicators

• Nifty 50 options front: meaningful call writing witnessed across 24,400 and 24,500 strikes.
• Nifty's Advance Decline Ratio is at 3:47.
• Nifty's PCR is currently at 0.72.
• Sensex support lies at 77,300 and resistance is at 78,100.