Sensex falls 1,048 pts on war in West Asia, fear index up 25%

MUMBAI: The escalating war in West Asia took a heavy toll on investors on Dalal Street as stocks crashed on Monday that left them poorer by Rs 6.6 lakh crore. With the war between the US-Israel and Iran elevating geopolitical risks, the sensex closed 1,048 points (1.3%) lower at 80,239 points, a closing level not seen in almost six months.

The day’s session started with the sensex down nearly 3,000 points, as a knee-jerk reaction to the US-Israel combined attack on Iran on Saturday morning. But soon buying emerged at lower levels and the index recovered some of the early losses.

At the end of a choppy session that saw NSE’s volatility index (VIX) jump 25%, the close for the sensex was much above the intra-day low at 78,544 points. Nifty on NSE followed a similar path to close 313 points (1.2%) lower at 24,866 points. The sharp uptick in VIX, also called the fear index, indicates increased uncertainty and risk aversion among market participants, market players said.

Foreign funds led the selling with the day’s net outflow at almost Rs 3,300 crore, BSE data showed. The day’s slide in stock prices left investors poorer by Rs 6.6 lakh crore with BSE’s market capitalisation now at Rs 456.9 lag crore, official data showed.

According to Vinod Nair, head of research, Geojit Investments, rising geopolitical tensions in West Asia unsettled global markets, with concerns over possible extension of the situation given the killing of Iran's supreme leader. “Rising crude oil prices and a weakening (rupee) reflect concerns over potential disruptions to oil supply, which could increase inflationary pressures in India and impact fiscals and strain margins for energy and chemical-dependent sectors.”

On Monday, most markets across the globe slid, starting with Asia. At close, Nikkei in Japan was down 1.4% while Hang Seng in Hong Kong closed 2.1%. Shanghai in China, however, bucked the trend to close 0.5% higher. In Europe, in late trades FTSE in UK was down 1.3% while Dax in Germany was trading 2.6% lower.

Of the 30 sensex stocks, 27 closed in the red. Among these, L&T and RIL contributed the most to the sensex’s slide. Only BEL, Sun Pharma and ITC closed with gains.

Oil marketing companies were among the worst hit. Indian Oil closed 4.5% down, Petronet LNG 4.4% and Adani Total Gas 3.7%. Crude oil producers, Oil India and ONGC, closed higher. BSE’s oil & gas index was down 2.3%.