Oil Shock Rocks Dalal Street: Financials, Auto Stocks Lead Market Crash

Dalal Street must have gotten used to some rude shocks over the past three weeks. Today was just another day as the bloodbath continued.

The evolving situation in West Asia made Sensex and Nifty run out of steam on Thursday as a sharp spike in crude oil prices and weak global cues triggered a brutal sell-off in Indian equity markets, wiping out recent gains and exposing the fragility of investor sentiment.

Sensex and Nifty tumbled sharply by more than 3 per cent, snapping a three-day rally as global headwinds intensified.

The Sensex plunged 2,496.89 points, or 3.26 percent, to settle at 74,207.24, while Nifty dropped 775.65 points, or 3.26 percent, to close at 23,002.15.

Was the sell-off limited to specific sectors?

The weakness was not confined to any single pocket, it was a broad-based sell-off.

All 16 major sectoral indices ended in the red. Financials and banking stocks led the decline, falling around 3 per cent each, with heavy selling in HDFC Bank.

Auto stocks bore the brunt of the pressure, with the Nifty Auto dropping more than 4 per cent. Realty stocks fell over 3.5 per cent, while broader markets also weakened significantly.

The Nifty Smallcap and Midcap indices declined around 2 to 2.5 percent, reflecting risk aversion beyond frontline stocks.

Which stocks dragged the market lower?

Heavyweights bore the brunt of the sell-off.

HDFC Bank, Eternal and Shriram Finance declined up to 5 per cent among the major laggards in the Nifty50 grouping. Larsen and Toubro dropped over 3 per cent, while Bajaj Finance and Shriram Finance also saw sharp dips.

IT stocks such as Infosys, TCS and Wipro remained under pressure amid weak global cues.

Aviation major IndiGo fell over 3 per cent, as rising fuel costs threatened margins, an immediate fallout of higher crude prices.

Even defensive names such as ITC and Hindustan Unilever slipped, though their losses were relatively contained.

Amid the carnage, a handful of stocks managed to stay afloat…

Oil & Natural Gas Corporation, Reliance Industries and Coal India emerged as the only gainers in the Nifty50 index, rising up to 2 per cent.

Coal India, in particular, showed resilience, supported by higher energy prices.

Why are crude oil prices driving the markets?

The surge in crude oil prices, driven by escalating tensions in the Middle East, has emerged as the central trigger for the market decline.

Higher oil prices raise inflation concerns globally and reduce the likelihood of near-term interest rate cuts, especially in the United States.

This shift in expectations has strengthened the dollar and tightened financial conditions, putting pressure on equities worldwide.

What about gold and silver ETFs?

Gold and silver exchange-traded funds (ETFs) fell over 5 per cent, tracking weakness in international bullion prices.

Bullion declined for a seventh straight session. Spot gold dropped more than 2 per cent to $4,704.32 an ounce in London, marking its longest losing streak since October 2023.

A firm dollar and a hawkish stance from the US Federal Reserve dampened hopes for rate cuts. Higher interest rates typically weigh on gold, as it does not offer any yield, making it less attractive compared to interest-bearing assets.

The stronger dollar further added pressure by making gold more expensive for global buyers.