Nifty PSU Bank has lost more than 4%, while Metal, Media, Auto, and Private Bank indices are trading at least 2% lower.
Here are five top reasons for the massive meltdown:
- US-Iran tensions: Geopolitical tensions are at peak after the US conducted air strikes in Iraq which killed top Iranian military commander and an Iraqi militia leader Soleimani. While Iran has vowed to relataliate, US President Donald Trump has warned that the US will respond "perhaps in a disproportionate manner," if Iran attacked any American person.
- Global stocks crash: The escalation in tensions has led to a risk-off sentiment, with investors exiting equities and flocking towards gold as a safe haven. Global stocks across the world crashed after the geopolitical developments. Asian shares toppled off 18-month highs with all Asian markets closing in the red. Major European markets also opened at least a percent lower amid the turmoil. Gold has risen to a 6-year high as market participants scurried to seek shelter in the yellow metal.
- Spike in crude prices: Crude prices also gained over 2% over fears of a supply disruption after Trump threatened sanctions on Iraq, shortly after Iraq's parliament voted in favor of expelling US and foreign troops. Brent crude futures soared to over $70/bbl, while WTI crude rose above $64/bbl.
- Rupee weakens further: The rupee slumped to below 72/$ on rising crude prices. The weakening rupee accompanied by higher crude prices threatens to throw the econonmy off the road to achieve its fiscal deficit target.
- Profit Booking: FPIs have withdrawn Rs2,418cr from India's capital markets in the first three days of 2020 to lock in profits.