The Indian stock market experienced a significant downturn today, influenced by several key factors, including escalating tensions in the Middle East that have heightened geopolitical concerns and increased investor caution.

Further, the release of US private employment data on Wednesday supported the view that the Federal Reserve does not need to cut interest rates aggressively, raising expectations for a strong reading for potentially crucial monthly non-farm payrolls figures on Friday.

Investor sentiment was also dampened following the Securities and Exchange Board of India’s (SEBI) announcement of new measures designed to reduce retail participation in derivatives trading. Additionally, there are concerns that foreign institutional investors (FIIs) might redirect their capital flows to China due to recent policy changes.

This apprehension has been exacerbated by considerable selling pressure from FIIs in the Indian market over the past few sessions.

The escalating tensions between Iran and Israel have led to a sharp rise in crude oil prices, a concerning development for India, which relies on imports for over 80% of its oil needs. Experts caution that if the conflict intensifies, it could have broader implications for global trade, affecting not just oil but other essential commodities.

This, in turn, could significantly alter inflation projections and pose challenges to economic stability.

Mid- and small-cap stocks are bearing the brunt of today’s market decline, with the Nifty Midcap 100 index falling below the 59,000 level to 58,891 points, marking a 2.4% drop from the previous close. Similarly, the Nifty SmallCap 100 index has tumbled 2.32% to 18,878 points.

Today’ drop has led the Midcap 100 index to correct 3.3% from its recent high, while the Nifty SmallCap 100 has dropped nearly 4% from its peak.

Among the top mid-cap losers, HPCL led the decline with a sharp drop of 7%. In the small-cap index, NBCC emerged as the biggest loser, falling 6.9%. At one point, NBCC shares plummeted 15%, reaching their lowest level since June, before recovering during the final hour of trading.

Nifty slips below 25,300, Sensex below 82,500

The Nifty 50 slipped below 25,300, and the Sensex fell under 82,500, marking their worst intraday performance in two months as mounting tensions between Iran and Israel pushed investors away from riskier assets like stocks toward safer havens such as gold and bonds.

The Nifty 50 plunged to 25,231, dropping 2.2% from Tuesday’s close and falling below 25,300 for the first time since September 12. This represents a nearly 4% correction from its all-time high of 26,277 in just four sessions.

Similarly, the Sensex declined to 82,434, slipping 2.17% and breaching the 82,500 mark for the first time since mid-September. This marked its fourth consecutive day of losses, bringing the total decline to 3.6%.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.