Stock market indices Sensex and Nifty opened in the red on Wednesday. The decline was triggered by renewed threats of tariffs on the pharmaceutical sector from US President Trump, as well as a sharp rise in oil prices amid escalating geopolitical tensions in the West Asia region.
The BSE Sensex index began the trading session with a drop of nearly 388 points, representing 0.50 percent from a level of 77,081. The index reached a low of 76,722.21, losing 748 points or 0.96 percent. Similarly, the Nifty 50 index fell by 90 points or 0.37 percent, opening at 24,097. This index, comprising 50 stocks, showed a minimum of 23,973.70, dropping by 214 points or 0.88 percent.
By 10:50 AM, both key indices were trading close to their daily lows: Sensex showed 76,832.77, indicating a decrease of 637 points or 0.82 percent, while Nifty was at 24,009.30, down 178 points or 0.74 percent.
At the sectoral level, the Nifty Pharma and Realty indices declined by more than 1.5 percent each. Declines were also observed in the Nifty PSU Bank, Financial Services, IT, Metal, and Oil & Gas indices. The only exception was Nifty Auto, which demonstrated a growth of almost 1 percent during the day.
In the broader market context, Nifty Midcap 100 and Nifty Smallcap 100 traded down by 0.65 percent and 1 percent, respectively. Meanwhile, the India VIX index rose to 12.94, increasing by more than 2.5 percent, signaling increased caution and volatility in the near term.
The Nifty Pharma and healthcare indices became the main laggards among the components of Nifty, leading to a nearly one percent drop in the main index. The fall occurred after US President Donald Trump announced a proposal to introduce a phased tariff regime on imported generic drugs aimed at stimulating domestic pharmaceutical production within the United States. The Nifty Pharma index dropped by 1.7 percent, reaching 25,639.70 during intraday trading.
Tushar Manudhane, Senior Vice President of Healthcare Institutional Research at Motilal Oswal Financial Services, noted that '90 percent of prescription generics are imported into the US, which effectively increases the tariff for everyone supplying the US market, and this is not specific to India.'
The rise in oil prices also contributed to the downturn in the domestic stock market. On Wednesday, prices rose by more than 1.57 percent, pushing Brent crude futures above $92.58 per barrel, while WTI crude futures increased by 1.34 percent, trading at $85.68 per barrel.
OMC stocks, representing state-owned oil companies including Bharat Petroleum Corporation, fell by 1.52 percent to 314 rupees per share, Hindustan Petroleum Corporation decreased by 2.13 percent to 398 rupees per share, and Indian Oil Corporation lost 0.77 percent, settling at 142 rupees on Wednesday after Brent crude prices jumped to $92 per barrel.
On Wednesday, the rupee opened weaker against the US dollar. The national currency weakened by 10 paise against the US dollar, reaching 96.34 compared to Tuesday's close at 94.24 per dollar.
Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, stated that 'traders continue to monitor the participation of the Reserve Bank of India through public sector banks to smooth out volatility. The central bank seems to allow gradual adjustment, preventing erratic movements.'
V. K. Vijayakumar, Chief Investment Strategist at Geojit Investment, believes that the ongoing conflict between the US and Iran and the rise in Brent crude prices will put pressure on markets, despite positive news in other areas. He added that 'market declines create opportunities to buy fundamentally sound stocks. Broader market superiority may continue in the short term.'
Rajesh Palvia, Head of Research at Axis Direct, noted that technically the market continues to trade cautiously below the 24,300 mark. He added: 'Sustainable growth above this level could revive momentum towards 24,500–24,550, while immediate support is at 24,100. A decisive break below this level could trigger further weakness towards 23,950. Any easing in crude oil prices would significantly improve market sentiment and serve as a trigger for a stronger recovery.'
Futures stock indices opened with a dip, reflecting weak global sentiment caused by escalating geopolitical tensions between the US and Iran. By 9:40 AM, the Sensex index fell by 447 points, or 0.59 percent, reaching 77,119, while Nifty dropped by 132 points or 0.57 percent, settling at 24,071.
During early trading, Sensex reached a low of 76,857.43, losing 712 points or 0.92 percent. Similarly, the Nifty index fell by 207 points or 0.86 percent, touching the 24,000.20 level. Among sectoral indices, Nifty Auto and Nifty Metal showed the largest losses, declining by 0.93 percent and 0.88 percent, respectively. However, Nifty IT moved against the general trend, showing a growth of 0.50 percent. Broader markets also corrected: Nifty Midcap 100 and Nifty Smallcap 100 fell by 0.39 percent and 0.35 percent.
The India VIX fear index jumped by 8 percent, exceeding the 13 mark, indicating increased market volatility in the near term. According to NSE data, the advance/decline ratio stood at 1,352/1,539, pointing to a negative bias.
The primary reason cited for the market decline was the tension in the Middle East. US military forces announced another round of strikes against Iran aimed at weakening its ability to freely attack commercial vessels passing through the Strait of Hormuz. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that mutual actions in the Middle East crisis have become the new normal. He emphasized that Iran's attempts to use geography for military purposes negatively affect energy importers like India, and President Trump's inconsistent stance on Iran has made stability a thing of the past.
Following new exchanges between the US and Iran, and ongoing uncertainty regarding the status of the Strait of Hormuz, crude oil prices rose. Brent crude futures climbed by $2.34 or 3.08 percent, reaching $78.35, while West Texas Intermediate (WTI) crude oil increased by $2.21 or 3.09 percent, totaling $73.62 per barrel. Vijayakumar considers crude oil price a critical factor, especially for India, and warns that a significant correction could occur if Brent crosses $90.
Concurrently, the rupee weakened by 37 points to 95.70 against the US dollar as the dollar strengthened and crude oil prices rose due to heightened Middle East tensions. The US Dollar Index (DXY), which measures the value of the USD against six major currencies, remained strong for the second consecutive day, trading around 101.10.
US government bond prices declined for the second week in a row, leading to yield increases to the highest levels since mid-May amid concerns over inflation and interest rates. Dwarish Vakil, Head of Primary Research at HDFC Securities, reported that the yield on 10-year Treasury bonds closed the week at 4.56 percent, up from 4.37 percent a couple of weeks ago. The yield on 30-year bonds reached 5.06 percent, higher than the previous 4.87 percent.
Asian markets also traded significantly lower due to geopolitical tensions and supply chain issues. At the last check, South Korea's Kospi led the decline, plunging 7 percent, followed by Japan's Nikkei 225, which fell 1.1 percent, and Australia's S&P/ASX 200 dropped 0.31 percent.
Sachin Gupta, Vice President of Technical Analysis Research at Choice Broking, noted that the immediate hurdle for Nifty remains the level around 24,400, which coincides with the 200-day EMA and is a critical resistance zone. A decisive breakout above this level could trigger a new rally towards the 24,600–24,800 marks. In the downtrend, 24,000 is expected to serve as immediate support, followed by the important level of 23,800. A sustained fall below 23,800 could increase the probability of a longer consolidation phase.
Gupta also added that derivatives data continues to show a positive backdrop. The Nifty Put-Call Ratio (PCR) sharply improved from 0.94 to 1.25, indicating aggressive selling of put options and strengthening bullish sentiment among derivatives traders. A high PCR suggests that market participants continue to build supportive positions at lower levels.
