Global uncertainties, mainly escalating tensions between Iran and Israel, have led to a massive correction in the equity markets in the last three days after a record-shattering rally that saw the BSE Sensex crossing the historic 75,000 mark last week.
Hotter-than-expected US inflation data fuelled concerns that the Federal Reserve will hold back on delivering the cuts to interest rates. Also, foreign fund outflows and profit-taking contributed to the correction in the equity markets.
In the past three days, the BSE benchmark tanked 2,094.47 points or 2.79 per cent. Investors' wealth tumbled Rs 7.93 lakh crore in the three days of the market crash amid simmering tensions in the Middle East and weak global trends.
"The heavy correction in the market can be attributed to several factors, including the escalating tensions between Iran and Israel, which have heightened geopolitical uncertainties and prompted risk aversion among investors.
"Additionally, the Federal Reserve's hawkish stance on inflation has shifted interest rate expectations, dampening hopes for significant interest rate cuts. Rising geopolitical tensions in the Middle East have contributed to the correction, as investors move towards safer assets amidst uncertainty. These factors combined have led to a significant correction in the market after a period of record rally," said Suman Bannerjee, CIO of hedge fund Hedonova.
"The recent heavy correction in the market can be attributed to geopolitical tensions. Additionally, anticipation of delayed rate cuts in the USA has added pressure. These factors have collectively contributed to the downturn following a period of record rally in the markets," Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd, said.
Swastika Investment Ltd Managing Director Sunil Nyati said the market corrected due to selling in the broader market, weak global cues, selling by Foreign Institutional Investors (FIIs), upcoming US Federal Reserve meeting and rising crude oil prices.
Widespread selling across various sectors and stocks can lead to overall market decline as investors' sentiment turns negative, Nyati said.
"India is a major importer of crude oil, and higher oil prices can negatively affect the country's trade balance, inflation, and fiscal situation," Nyati added.
The BSE Sensex hit its all-time peak of 75,124.28 on April 9. The index breached the historic 75,000 mark for the first time ever on the same day. On April 10, the 30-share BSE benchmark settled above the 75,000 threshold limit for the first time.
The market capitalisation of BSE-listed companies went past the coveted Rs 400 lakh crore mark for the first time ever on April 8. From February 29 to April 10, the BSE benchmark jumped 2,537.85 points or 3.50 per cent.
However, from April 12 onwards the markets have been falling.
