Benchmark equity indices witnessed a sharp sell-off on Wednesday morning, with the Sensex plunging more than 760 points and the Nifty slipping below the 23,300 mark as investors grappled with renewed geopolitical uncertainty in West Asia, rising crude oil prices, foreign investor concerns and a steep correction in information technology stocks.

The S&P BSE Sensex tumbled 763.45 points, or 1.02 per cent, to 73,886.39 in early trade, while the NSE Nifty50 declined 213.75 points, or 0.91 per cent, to 23,269.80. The weakness was reflected across broader markets as well, with the Nifty Midcap 100 falling 0.84 per cent and the Nifty Smallcap 100 shedding 0.66 per cent.

Market volatility surged sharply, with India VIX, often referred to as the market’s fear gauge, jumping 8.22 per cent, signalling heightened investor anxiety amid growing uncertainty.

Iran-US Uncertainty Dampens Market Sentiment

A key trigger behind Wednesday’s decline was the resurgence of uncertainty surrounding a possible peace agreement between the United States and Iran.

Markets had recently drawn support from expectations that diplomatic efforts between Washington and Tehran could ease tensions in West Asia and stabilise global energy supplies. However, fresh hostilities have cast doubt over the timeline and prospects of any breakthrough.

Investor sentiment weakened after the US military said Iranian missile attacks targeting Bahrain, Kuwait and other locations in the Gulf region were either intercepted or failed to reach their intended targets. The developments reinforced concerns that geopolitical risks remain elevated and could continue to disrupt global markets.

The renewed tensions prompted investors to move away from risk assets, leading to broad-based selling across equity markets.

Crude Oil Surge Raises Economic Concerns

Rising crude oil prices added further pressure on domestic equities.

Brent crude climbed 0.88 per cent to USD 96.84 per barrel, while West Texas Intermediate crude advanced 0.95 per cent to USD 94.65 per barrel. For India, which relies heavily on imported crude oil, sustained increases in energy prices pose a significant challenge.

Higher oil prices can fuel inflation by increasing transportation, logistics and manufacturing costs, while also squeezing corporate profit margins. The latest rally in crude was driven by fears that escalating tensions involving Iran could threaten energy supplies from one of the world’s most critical oil-producing regions.

The impact was also visible in currency markets. The rupee opened 0.2 per cent lower at 95.4475 against the US dollar compared to its previous close of 95.2650, reflecting concerns over India’s widening import bill and broader global uncertainty.

IT Stocks Lead Market Decline

Information technology stocks emerged as the biggest drag on benchmark indices after witnessing strong gains in recent sessions.

The Nifty IT index slumped 3.78 per cent, making it the worst-performing sectoral index of the day. Tata Consultancy Services led the losses among Sensex constituents, falling 5.73 per cent. Tech Mahindra dropped 3.31 per cent, Infosys declined 2.99 per cent and HCL Technologies slipped 2.67 per cent.

The decline came amid profit-booking after a recent rally fuelled by optimism around artificial intelligence spending, improving global technology demand and expectations of lower interest rates in the United States.

Market participants also remained cautious ahead of the Reserve Bank of India’s monetary policy decision scheduled for June 5.

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the renewed rise in crude prices and continued pressure on the rupee remain major concerns for the Indian economy.

“The mild escalation in the West Asia conflict has again pushed up Brent crude price to close to USD 97 indicating no respite to India from the energy shock. Rupee has edged down to 95.26 to the dollar. The sustained fall in the rupee has been arrested for now but the rising current account deficit and sustained FPI outflows are areas of concern. The RBI commentary and actions on June 5th will be keenly watched by the market,” he said.

He added that while several global markets continue to benefit from stronger earnings prospects, India’s growth outlook remains relatively challenging.

According to Vijayakumar, modest earnings growth expectations for FY27, coupled with concerns over slower economic expansion and higher inflation, have weighed on investor sentiment. He noted, however, that continued participation by retail investors remains a supportive factor for the domestic market.

Selling pressure was visible across most sectors, with Realty, Media, PSU Banks, Financial Services, FMCG and Private Banks all trading in the red. Nifty Metal proved relatively resilient, declining only marginally.

Investors are expected to closely monitor developments in the Iran-US conflict, movements in global crude oil prices and the RBI’s policy commentary over the coming days. Any progress on diplomatic efforts in West Asia could help ease market concerns, while further escalation may keep volatility elevated in the near term.

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