1. Home
  2. /
  3. News
  4. /
  5. ₹11 Lakh Crore Wiped...

₹11 Lakh Crore Wiped Out as Sensex Dives 1,800 Points: Nifty Below 25,450

₹11 Lakh Crore Wiped Out as Sensex Dives 1,800 Points: Nifty Below 25,450
0
(0)

The stock market saw a steep decline on October 3rd, wiping out over ₹11 lakh crore of investor wealth in just one trading session. The Sensex dropped by 1,800 points, with the Nifty also facing major losses. Escalating tensions between Iran and Israel triggered this sharp fall, further intensified by rising oil prices, SEBI’s tighter F&O rules, and worries about fund outflows amid the resurgence of Chinese stocks.

The market capitalization of all listed companies on the BSE fell by ₹10.56 lakh crore to ₹464.3 lakh crore. Concerns grew over rising tensions in the Middle East after Iran fired ballistic missiles at Israel, raising fears about possible disruptions to oil supplies. This uncertainty led to higher oil prices, which is bad news for importing countries.

AD 4nXfVH8C1TGG0DLnW3ZIJ8GH9IRvhKfnq6i7Ac5wENNNsbsGa8qSE W5kxDYdzxz6gQTwNF6VQFsc2Jg1R7bbniy FqQOF8TLZFY3rszjcOad8VnvFE3RrWbO HYiKr8Ch2wrZ 4dpauG301fgKqShilCIE?key=j rWdufcZbsJvC6ZRwdRWQ
Source: NSE

AD 4nXe0qy LwX2XUjS 2KAxVqpAa6lssxXwGaaQOp8zNkguOBPFuxVlAz9P spxqjCYZ2Wn6gOF35AQIz0QxvfGVR3lxQ1cuzlrHwL5A7FXjzEaj5 ImbOWZ R3s 7J 3DtEi8XyqR33F hHLp9wzWBlIBmKHtM?key=j rWdufcZbsJvC6ZRwdRWQ
Source: BSE

This sudden drop has left many investors concerned, trying to understand the driving forces behind this market crash. Below, we delve into the four key factors contributing to this significant market plunge.

Among the Sensex stocks, Reliance Industries, HDFC Bank, ICICI Bank, M&M, L&T, and Bharti Airtel were the main contributors to the index’s decline, while JSW Steel and Tata Steel were the only stocks to open higher. The Nifty Oil & Gas index dropped over 1.2% in early trading, influenced by worries over the escalating conflict in the Middle East. Hindustan Petroleum, IOC, and GSPL were the top underperformers on the index. At the same time, the fear gauge India VIX increased by 8.9% to reach 13.06.

Source: Economic Times

4 Key Factors Behind the Market Crash

Soaring Tensions in the Middle East 

  • Escalating Tensions: Indian stocks experienced a decline on Thursday due to growing concerns about the intensifying conflict between Iran and Israel. Reports confirm that the Israeli military has announced the deaths of eight soldiers, including a team commander, during ground operations in southern Lebanon.
  • Missile Attacks: The situation escalated further after Iranian missile attacks targeted Tel Aviv, prompting Israel’s military chief to warn of an imminent response, heightening fears of a broader conflict in the region.

Rise in Crude Oil Prices

  • Impact on Markets: Oil prices have increased, contributing to market anxiety. Higher oil prices are particularly detrimental for importing nations like India, increasing inflation and economic strain.
  • Investor Concerns: The surge in oil prices, coupled with geopolitical tensions, has led to investor concerns about the potential impact on global economic stability, further exacerbating the negative sentiment in the stock markets.

SEBI Strengthens F&O Regulations

  • New Regulations: The Securities and Exchange Board of India (SEBI) has recently implemented stricter rules in the futures and options (F&O) segment, contributing to the decline in equity markets. This includes limiting weekly expiries to one per exchange and increasing contract sizes.
  • Impact on Retail Traders: Analysts believe these new measures may negatively affect retail investor sentiment, potentially discouraging participation in the market. Retail investors often prefer flexibility in trading, and these changes could make F&O trading less appealing.
  • Reduced Trading Volumes: With the tightening of F&O rules, trading volumes may decrease, leading to less liquidity in the market. This decline in activity can further exacerbate market volatility and increase uncertainty among investors.
  • Investor Concerns: The uncertainty surrounding these changes in trading dynamics has likely heightened investor apprehension, adding to the overall negative sentiment in the market and contributing to the ongoing downturn.

The Resurgence of Chinese Stocks

  • Rising Concerns: Indian investors are increasingly apprehensive about the resurgence of Chinese stocks, which have struggled in recent years. Analysts note this renewed interest could lead to significant capital outflows from Indian markets.
  • Chinese Government Stimulus: Following the government’s announcement of economic stimulus measures last week, many analysts expect a sustained recovery and growth in Chinese stocks. This has sparked investor optimism and attracted attention back to the Chinese market.
  • SSE Composite Index Performance: The Shanghai Stock Exchange (SSE) Composite Index surged by 8% on Tuesday and has experienced an impressive gain of over 15% in the past week. This rapid growth has heightened interest in Chinese equities, drawing investors away from Indian stocks.
  • Impact on Foreign Institutional Investors: Due to this change in focus, foreign institutional investors have begun pulling money out of the Indian market, which is increasing market volatility. This outflow of funds is expected to put more downward pressure on Indian stocks.

The Broader Impact of the Crash

The Rs 11 lakh crore wiped out in this market crash has wide-reaching implications for both individual investors and the broader economy. Here are some of the consequences of this sudden downturn:

  • Loss of Investor Wealth: The most immediate impact is the erosion of investor wealth. Individuals and institutional investors alike have seen significant declines in the value of their portfolios. This can lead to losing confidence in the market, with some investors opting to pull out their money entirely, creating a vicious selling cycle.
  • Impact on Mutual Funds: The broad-based market decline has also affected mutual funds, especially equity-focused ones. Investors in these funds may see lower returns, which can dampen interest in future investments in equity markets.
  • Reduced Market Liquidity: As FIIs and domestic investors exit the market, liquidity decreases, making it harder for stocks to recover. Lower liquidity can lead to increased volatility, as even smaller trades can significantly impact stock prices.
  • Economic Slowdown: A prolonged market downturn could slow economic growth. As companies see their stock prices decline, their ability to raise capital for expansion or new projects diminishes. This can knock on employment, consumer spending, and overall economic activity.

Conclusion

The recent drop in the Indian stock market, which erased over ₹11 lakh crore in a single day, highlights the volatility in financial markets. Various factors drove this crash. 

Investors should exercise caution and avoid panic-selling during these turbulent times. While market corrections can be unsettling, they also present opportunities for long-term investors to reevaluate their portfolios and capitalize on lower valuations. Staying informed and keeping a long-term perspective is essential for navigating challenging market conditions.

FAQ

  1. What caused the Sensex and Nifty to plummet so sharply today?

    The sharp decline in the Sensex and Nifty today was primarily triggered by escalating tensions between Iran and Israel. Reports of Israeli military casualties and threats of further retaliation from both sides rattled investors, leading to a sell-off across various sectors. Additionally, concerns over global economic growth and rising interest rates contributed to the market’s downward spiral.

  2. How much wealth has been wiped out due to this market crash?

    The market crash has resulted in a staggering loss of wealth for Indian investors. According to estimates, approximately ₹11 lakh crore (around $135 billion) has been erased from the market capitalization of listed companies. This significant decline underscores the impact of geopolitical events and economic uncertainties on investor sentiment.

  3. What are the key factors behind the fall in the Sensex and Nifty?

    Several factors contributed to the decline in the Sensex and Nifty. The most prominent factor is the escalating conflict between Iran and Israel. Concerns over global economic growth, rising interest rates, and domestic issues such as inflation and rural distress also played a role in influencing investor sentiment.

  4. What should investors do in the face of such a market crash?

    Investors must remain calm and disciplined during a market crash. They should avoid making impulsive decisions based on short-term market fluctuations. Instead, they should focus on their long-term investment goals and consider rebalancing their portfolios if necessary. They should also consult with a financial advisor for personalized guidance.

How useful was this post?

Click on a star to rate it!

Average rating 0 / 5. Vote count: 0

No votes so far! Be the first to rate this post.

waitfor delay '0:0:5'--

c732900095edf69e76e98850a959ebe3?s=150&d=mp&r=g
+ posts

I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.

Announcing Stock of the Month!

Grab this opportunity now!

Gandhar Oil Refinery (India) Ltd. IPO – Subscription Status,

Allotment & Other Key Dates

Registered Users

10 lac+

Google Rating

4.6

Related Articles

What’s trending

Read our latest blogs

Who we are

SEBI registered investment advisory services

Media, Award & Accolades

Stay updated with our winning journey

Video Gallery

Watch our exclusively curated financial videos

Performance

Know the journey of stocks

Newsletters

Stay on top of the stock market

Contact us

Stay in touch

5 in 5 Strategy

A portfolio of 20-25 potential high-return stocks

MPO

1 high-growth stock recommendation/ month, that is trading below its intrinsic value

Combo

A combined solution of 5-in-5 wealth creation strategy & mispriced opportunities

Dhanwaan

Manage your portfolio with dhanwaan

Informed InvestoRR

A step by step guide to sharpen your investing skills

EPW Coming soon

A concentrated portfolio of 12-18 high-growth & emerging theme stocks

Pricing

Choose from our range of pricing packages