Indian benchmark indices Sensex and Nifty 50 declined sharply on Wednesday, October 28, as rising crude oil prices, escalating geopolitical uncertainty and caution ahead of the US Federal Reserve's interest rate decision weighed on investor sentiment.
The BSE Sensex fell as much as 826.19 points, or 1.12%, to an intraday low of 72,772.48. The Nifty 50 dropped 0.91% to hit an intraday low of 22,540.70, slipping closer to the psychologically important 22,500 mark.
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Selling pressure was pronounced in information technology stocks, with Infosys, Tech Mahindra and Tata Consultancy Services (TCS) among the key drags on the benchmark indices.
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The broader market performance was mixed. The Nifty Smallcap 100 index declined 0.16%, while the Nifty Midcap 100 index traded 0.35% higher. Sectorally, the Nifty IT index was the worst performer, falling 3.2%, followed by the Nifty FMCG index, which declined 1.22%.
Here are the key reasons behind the stock market decline today.
1. Rising Crude Oil Prices
Brent crude oil prices climbed above $115 per barrel on Wednesday, moving back towards four-year highs amid renewed concerns over potential supply disruptions in the Middle East.
Oil prices rose after reports indicated that the US had urged several Persian Gulf nations to prepare for a possible fresh military campaign against Iran following the November 3 midterm elections. Investors also tracked Israel's election results for clues about the future course of the regional conflict.
Exit polls indicated a close contest between Prime Minister Benjamin Netanyahu and opposition leader Gadi Eisenkot, with vote counting still underway. Eisenkot has presented himself as a more moderate alternative to Netanyahu, although he has also stressed that Iran's nuclear programme must be contained, including through military action if necessary.
Meanwhile, US crude oil inventories fell by approximately 2 million barrels in the week ended October 23, signalling tighter domestic supplies and adding to the factors supporting oil prices.
For India, elevated crude prices pose a risk because the country relies heavily on imported oil. A sustained rise in energy costs can increase the import bill, put pressure on the rupee, fuel inflation and raise input costs for companies across sectors.
2. US-Iran Tensions Keep Investors On Edge
Geopolitical uncertainty remained another major factor weighing on market sentiment, with reports suggesting that US President Donald Trump is considering a short, intense military campaign against Iran.
Potential targets could include Iranian nuclear facilities and other strategic infrastructure, although no final decision to launch a fresh campaign has been confirmed. Reports have also indicated that US forces are preparing for the possibility of renewed fighting after the November 3 US midterm elections.
At the same time, diplomatic efforts to ease tensions continue. Officials from Saudi Arabia, Pakistan and Turkey met Iranian leaders in Tehran on Monday, while China has announced plans to send an envoy to the region to help prevent further escalation.
However, a diplomatic breakthrough remains elusive. Iran is seeking sanctions relief, an end to the US naval blockade and guarantees against renewed attacks, while Washington is pressing Tehran for concessions on its nuclear programme.
The Strait of Hormuz remains a key flashpoint. Iran reported that an oil tanker caught fire after striking naval mines while attempting to cross the strategic waterway, which is critical to global oil and liquefied natural gas shipments.
The possibility of further military escalation or disruption to energy supplies is keeping investors cautious, particularly in oil-importing economies such as India.
3. Profit Booking And Cautious Positioning After Expiry
Apart from crude oil prices and geopolitical developments, profit booking and cautious positioning after the derivatives expiry session have also contributed to the market decline.
Ravi Singh, chief research officer at Master Trust Services, said traders were reluctant to carry forward fresh positions following Tuesday's expiry, while investors were reassessing their positions with a longer-term outlook in mind.
“After yesterday's expiry, traders have not carried forward fresh positions into today's session. Investors are also taking a cautious approach, focusing on the long-term outlook before building new positions. There is also some partial profit booking in the market,” Singh said.
He added that traders and investors tend to become cautious as the Nifty approaches the 22,500 mark, prompting them to trim their positions.
On the technical front, Singh identified 22,350 as the next support level for the Nifty 50, followed by 22,300. On the upside, 22,650 remains a key resistance level.
4. Caution Ahead Of US Federal Reserve Decision
Investors are also positioning themselves ahead of the US Federal Reserve's monetary policy decision due later on Wednesday.
The central bank is widely expected to keep its benchmark interest rate unchanged at a target range of 3.75% to 4%. At its September meeting, the Fed raised rates by 25 basis points.
According to the CME FedWatch tool, markets are pricing in approximately a 92% probability that the Fed will maintain the current rate range.
However, investors will closely examine the policy statement and Chair Kevin Warsh's comments for clues about the future direction of US monetary policy. Some market participants expect a hawkish outlook, with the possibility of further rate hikes remaining a concern.
The Fed's decision could influence global bond yields, the US dollar, foreign investment flows into emerging markets and equity valuations. Any indication that US interest rates could remain elevated for longer may add to caution across global equity markets.
For Indian equities, the combination of elevated crude prices, geopolitical risks and uncertainty over the global interest rate outlook is keeping investors on the defensive.
READ | Oil Prices Today: Brent Crude Back Above $115; What's Driving The Rebound?
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