Sensex, Nifty slide as Strait of Hormuz attacks rekindle energy crisis fears

Mumbai: India’s equity indices slumped 1.7% in rollercoaster trade on Wednesday amid a fresh spike in oil prices as an escalation in the West Asian conflict wiped out the previous day’s gains. Brent crude futures jumped 4% to $91.3 a barrel on Wednesday, bouncing from the previous day’s decline of 11.3%, reviving concerns over the global energy crisis as ships came under attack in the Strait of Hormuz. Other targets in the region were also targeted during the day, as the Gulf war entered its 12th day.

The NSE Nifty finished at 23,866.85, closing 394.75 points or 1.6% lower. The BSE Sensex ended at 76,863.71, down 1.7% or 1,342.27 points. Both indices have fallen more than 2.5% over the past week.

“Iran indicated that it has no plans of surrender and will not relent control over the Strait of Hormuz, which signals that the war is far from over and is raising inflationary concerns,” said Dharmesh Kant, head of research, Cholamandalam Securities.

Fear Gauge Climbs to 21.1
Most sectoral indices ended lower on Wednesday. The Nifty Auto index dropped 3.2% while the Bank Nifty shed 2.1%. The Nifty Private Bank and PSU Bank indices declined 2.4% and 1.8%, respectively.

The Volatility Index (VIX) spiked 11.4% to 21.1, indicating that traders expect elevated risk in the near term.

Since the war looks like it’s not ending soon, investors should brace for more pain, Kant said.

“The blockage of trade through the Strait of Hormuz will lead to an increase in crude oil prices, ultimately amplifying adverse impact across sectors,” he said. “The earnings estimate for FY27 could undergo a cut as supply-led inflation eats into corporate profit as well as consumer surplus.”

At home, foreign portfolio investors (FPIs) sold shares worth a net Rs 6,267 crore on Wednesday, while domestic institutional investors bought shares worth Rs 4,966 crore. So far in March, global investors dumped stocks worth Rs 40,668 crore, the most in six months.

The rebound on Tuesday was a “dead cat bounce,” said Vipin Kumar, AVP, Globe Capital Market.

“A sustained move below 23,800 could drag the index towards 23,400-23,200 levels while a rebound around 24,300-24,400 levels could attract selling pressure,” he said.

Volatility is expected to remain high, and any de-escalation could bring respite to the markets, he said.

The Nifty Midcap 150 index declined 1.1% while the Smallcap 250 index ended 0.4% lower. Over the past week, the midcap index shed 0.8% while the smallcap index rose 0.5%.

“A sustained recovery depends on how the war pans out and monsoon predictions for this year,” said Kant. “The lack of any positive triggers is keeping hot money at bay as well.”

Elsewhere in Asia, Taiwan jumped 4.1%, driven by tech stocks. Japan and South Korea gained 1.4% each. China rose 0.3%, while Hong Kong declined 0.3%.