₹600000-Cr Wipeout Hits Markets; Sensex Crashes 1150 Points Over Strait Of Hormuz Crisis

Indian equity benchmarks suffered an aggressive intraday sell-off on Wednesday. Escalation in the West Asia conflict threatened global energy supply lines and triggered a major rush out of risk assets.

The BSE Sensex plunged as much as 1,150 points, or 1.54%, hitting an intraday low of 73,492.60. The initial market tumble wiped out more than 600,000 crore rupees ($72 billion) in investor wealth. Strong domestic institutional buying emerged in late afternoon trade, helping the index recover a major portion of its losses to close 303.67 points lower at 74,346.17. The Nifty 50 followed, diving nearly 300 points to an intraday low before settling 78 points lower at 23,405.60.

Strait of Hormuz

The primary reason for the market panic came from the strategic maritime chokepoint of the Strait of Hormuz. The US military reported neutralizing several Iranian drone and missile attacks across the Gulf region. In response, defensive strikes were launched against military positions on Iran’s Qeshm Island.

The exchange escalated anxieties over a prolonged shipping blockade. Consequently, Brent crude oil prices quickly shot up toward $97 per barrel.

As a country that imports more than 80% of its crude needs, India faces immediate economic pressure from rising oil prices. Higher energy costs risk widening the nation's current account deficit and driving up domestic inflation. The macroeconomic strain pushed the Indian rupee down to a weak level of 95.26 against the US dollar.

Tech Sector and Global Headwinds

Local factors aggravated the global energy shock. Nifty IT plunged nearly 5% during morning trade, leading the sectoral losses. Investor sentiment worsened after a major brokerage note raised questions about growth timelines for leading technology firms, prompting rapid profit-taking.

Global macroeconomic data further complicated the trading landscape. Strong labor market openings data out of the United States lowered hopes for upcoming interest rate cuts by the Federal Reserve. Instead, expectations for a US interest rate hike later this year climbed toward 40%.

The prospect of prolonged high interest rates in Western markets accelerated capital flight from emerging economies. Foreign Institutional Investors maintained a heavy selling streak, pulling thousands of crores out of domestic equities over consecutive sessions.

Late Institutional Support

Despite the morning dive, the market found a firm floor near the 73,300 support zone. Traders noted that domestic mutual funds and retail investors stepped in to buy high-quality stocks at lower levels.

The late-day recovery prevented a technical breakdown of the index. However, market volatility is likely to persist. Investors are now closely turning their attention to the Reserve Bank of India’s upcoming monetary policy commentary on June 5, looking for guidance on how the central bank plans to manage the energy shock.

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