Dalal Street bloodbath: Sensex tanks 1,800 points, is there more pain ahead for investors?

As of 2:42 pm, the sell-off on Dalal Street intensified, with the benchmark BSE Sensex plunging 1,766.68 points, or 2.26%, to 76,414.04, while the NSE Nifty50 tumbled 553.35 points, or 2.27%, to 23,845.35 as escalating US-Iran tensions, a sharp spike in crude oil prices above $78 per barrel and weak global cues triggered broad-based selling across sectors.

In Short

• Sensex and Nifty fell over 2% amid fresh US-Iran tensions
• Trump declared interim Iran peace deal 'over' after US strikes
• Crude oil prices surged above $78 per barrel, worrying India

Just when investors thought the worst was over, Dalal Street has been hit by a fresh wave of panic. Sensex and Nifty plunged in deep red, falling 2% in afternoon trade.

After spending the past few weeks recovering on easing geopolitical tensions, falling crude oil prices and the return of foreign institutional investors (FIIs), markets were thrown back into uncertainty after fresh hostilities erupted between the US and Iran.

The trigger this time wasn't just military action. US President Donald Trump, known for his blunt and often market-moving remarks, further rattled investor sentiment.

US President Donald Trump suggested that the interim peace deal signed with Iran to end the conflict was "over", hours after America launched fresh strikes against Tehran in retaliation for attacks on three commercial vessels in the Strait of Hormuz. Speaking at a Nato summit in Turkey, Trump called the Iranian leaders "scum" and "sick people", underlining that he did not want to engage with Tehran.

When asked about the memorandum of understanding (MoU) signed with Iran barely three weeks ago, Trump put it bluntly. "For me, the MoU is over. I don't want to deal with them anymore," the US President said.

The comments fuelled fears that diplomatic efforts had collapsed, raising the possibility of prolonged tensions in the oil-rich Middle East.

That immediately sent crude oil prices soaring, a worrying development for India, which imports nearly 85% of its crude oil requirement.

As of 2:42 pm, the sell-off on Dalal Street intensified, with the benchmark BSE Sensex plunging 1,766.68 points, or 2.26%, to 76,414.04, while the NSE Nifty50 tumbled 553.35 points, or 2.27%, to 23,845.35. The Nifty also slipped below the psychologically important 24,000 mark during the session.

Brent crude jumped more than 5.6% to trade above $78 per barrel, while WTI crude surged nearly 6% to around $74.5 a barrel, signalling renewed fears of disruptions to global energy supplies.

WHAT SPARKED THE SELLOFF?

Markets had already opened in the red after reports emerged that the United States had launched fresh strikes against Iran. The situation deteriorated further after Iran reportedly said the earlier understanding between the two countries had been violated, reviving fears of a prolonged conflict.

Trump's latest remarks added another layer of uncertainty.

For equity investors, rising oil prices are among the biggest macro risks for India. Higher crude increases the country's import bill, pushes up inflation, weakens the rupee and raises input costs for companies, hurting corporate earnings and economic growth.

The sharp jump in crude therefore prompted investors to cut risk exposure across sectors, leading to broad-based selling on Dalal Street.

GLOBAL SELLOFF ADDS TO THE PAIN

The weakness wasn't limited to India.

Global sentiment had already turned cautious after Wall Street witnessed a technology-led sell-off overnight. The Nasdaq Composite fell more than 1%, dragged down by chipmakers amid fresh concerns over whether the artificial intelligence-driven rally has run ahead of fundamentals.

The trigger came after Samsung Electronics' earnings failed to meet the market's lofty expectations despite reporting record profits. Investors questioned whether demand for AI hardware can remain as strong as previously expected.

Adding to the uncertainty were reports that Chinese AI startup DeepSeek is developing its own AI chips, potentially reducing dependence on established semiconductor giants.

The weakness spilled over into Asian markets, where technology-heavy indices remained under pressure, further weighing on investor sentiment globally.

SELLING WIDENS ACROSS DALAL STREET

The sell-off was broad-based.

Every Nifty heavyweight except Trent traded lower during the session.

Maruti Suzuki dropped over 3.5%, IndiGo fell more than 4%, Bajaj Finance declined over 3%, Hindustan Unilever slipped nearly 3%, UltraTech Cement lost close to 3%, Kotak Mahindra Bank fell over 2.7%, BEL dropped more than 2.6%, while ICICI Bank, HDFC Bank, Reliance Industries, Bharti Airtel, Larsen & Toubro, SBI, Axis Bank, Adani Ports and M&M also witnessed heavy selling.

Among broader indices, Nifty100, Nifty200, Nifty500, Nifty Midcap 50, Nifty Midcap 100 and Nifty Smallcap100 all traded sharply lower, while India VIX — the market's fear gauge — surged more than 25%, indicating a sharp rise in volatility expectations.

Sectorally, auto, financial services, FMCG, media, metals, PSU banks, private banks, oil & gas, chemicals and financial services ex-bank were among the biggest losers. Defensive sectors such as healthcare and pharma managed to outperform but were unable to offset the broader market weakness.

IS THERE MORE PAIN AHEAD?

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said with the renewed U.S.-Iran tensions and the consequent spike in Brent crude to $76, the market is again back to uncertain territory.

"How long this would last and what would be its consequences are now in the realm of uncertainty. The market was slowly gaining strength on positive FII activity and improving macro fundamentals. The renewed U.S.-Iran tensions have put a temporary question mark on this positive development. Therefore, investors have to wait and watch the developments," he added.

"The weakening of the chip trade globally and FIIs turning buyers in India are clear positives for the Indian market. During the last three days FIIs have been consistent buyers in Indian market having bought equity for Rs 1,991 crore. Even though the amount is small, this marks a significant trend in FII activity," said Vijaykumar.

"The uncertainty surrounding the chip trade and the huge concentration risks associated with investing in three stocks are turning the FIIs away from markets like South Korea and Taiwan and towards stable markets like India. If the U.S.-Iran tensions don't escalate further the FII activity will continue to favour India. This can change if the tensions escalate and crude again flare up impacting India's macros," he added.

The next move for Dalal Street will largely depend on developments in the Middle East.

If tensions continue to escalate and crude remains above $78 a barrel, analysts believe volatility could persist as investors reassess India's inflation outlook, corporate earnings and the Reserve Bank of India's interest-rate trajectory.

On the other hand, any signs of diplomatic de-escalation, coupled with continued FII inflows and a strong start to the June-quarter earnings season, could help stabilise markets.

For now, however, geopolitical headlines, may drive Dalal Street.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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