Sensex settles 1,300 pts lower, Nifty ends at 24,000; crude oil surge among key factors behind decline

• Sensex and Nifty drop 3% as global oil prices surge.
• All sector indices and broader markets faced heavy selling pressure.
• Rupee nears record low amid rising crude prices, FII outflows.

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The benchmark equity indices Sensex and Nifty tumbled nearly 2 percent on Monday, dragged down by a sharp surge in global crude oil prices, weak global cues and persistent foreign fund outflows.

The Sensex tanked 1,352.74 points, or 1.71 percent, to settle at 77,566.16, registering its second day of decline. During the day, the benchmark crashed 2,494.35 points, or 3.16 percent, to 76,424.55.

The Nifty dropped 422.40 points, or 1.73 percent, to end at 24,028.05. Intra-day, it tumbled 752.65 points, or 3.07 percent, to 23,697.80.

All the 16 major sectoral indices traded in the red. Broader markets also witnessed heavy selling pressure, with the Nifty Smallcap100 and Nifty Midcap100 indices falling about 3 percent each.

Key factors behind market decline

1) Crude surge: Brent crude, the global oil benchmark, surged about 26 percent in early trade to around USD 119 per barrel, the highest level since July 2022. Iraq and Kuwait have begun cutting oil output, adding to earlier liquefied natural gas reductions from Qatar as the ongoing war has disrupted shipments from the Middle East.

A sharp rise in crude prices is negative for India, which imports a large share of its oil requirements. Higher crude costs can widen the country’s import bill, fuel inflation and weigh on corporate earnings, which in turn dampens investor sentiment in the equity market.

"Brent crude has spiked above USD 115 delivering a big oil shock to economies and markets. Big oil importers like India will be hit hard if the West Asian conflict lingers long and crude price remains high," said V K Vijayakumar, Chief Investment Strategist at Geojit Investments.

2) Weak global cues: Asian markets also witnessed a sharp sell-off. South Korea’s Kospi tumbled more than 7 percent and Japan’s Nikkei 225 declined 6.5 percent. China’s Shanghai SSE Composite and Hong Kong’s Hang Seng were also trading lower.

The US markets ended in the negative on Friday. Wall Street futures were down up to 2 percent, indicating a weak opening for US markets later in the day.

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3) Persistent FII outflow: Foreign Institutional Investors (FIIs) continued their selling spree, offloading equities worth Rs 6,030.38 crore on Friday.

"The net FPI buying witnessed in February has reversed due to the Middle East conflict. In the first four trading days of March FPIs sold equity for Rs 21,829 crores. Uncertainty surrounding the Middle East conflict, steady decline in the market, the vulnerability of the Indian economy to sharp crude spike and the sharp depreciation of the rupee contributed to the sustained FII selling in the cash market. FPIs are unlikely to return to the market as buyers until there is some clarity on the outcome of the conflict and decline in the price of crude," added Dr. VK Vijayakumar.

4) Weak rupee: The rupee fell 46 paise to 92.28 against the US dollar in early trade on Monday, nearing its all-time intra-day low, amid a surge in crude oil prices and strengthening of the American currency.

At the interbank foreign exchange market, the rupee opened at 92.22 and slipped further to 92.28 against the US dollar, down 46 paise from its previous close. The local unit had touched an all-time intra-day low of 92.35 on March 4.

Forex traders said rising crude prices, heavy FII outflows and the sharp fall in domestic equities exerted pressure on the currency.

5) India VIX rises: India VIX, the market’s volatility gauge or fear index, jumped more than 21 percent to 24.18, its highest level in 21-months. A spike in volatility indicates rising uncertainty and risk perception among investors, often leading to increased selling in equities.

Last week, the BSE benchmark had tanked 2,368.29 points or 2.91 percent, while the Nifty declined 728.2 points or 2.89 percent.

6) Selling in banking shares: Public sector banks declined more than 5 percent after sliding 6.5 percent last week on fears that higher crude prices could lift borrowing costs, push bond yields up and compress treasury gains. Top private ​lenders HDFC Bank and ICICI Bank, dropped more than 3 percent.

Technical outlook

Anand James, Chief Market Strategist at Geojit Investments, said the Nifty may head towards 23,535, which would complete a 61.8 percent retracement of the upmove since March 2025.

"A breach of the same could open the door for further downside, initially targeting the March 2025 low near 22,000 and the November 2023 low around 19,000. Near-term upside prospects depend on the ability to hold above 24,000, he said.

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