Investors lose Rs 12 lakh crore in an hour: Why are markets crashing today

Indian benchmark indices -- both Sensex and Nifty -- opened in deep red on Monday as the Iran war shows no signs of de-escalation while there has been no clarity on the opening of the critical Strait of Hormuz for oil tankers.

Within one hour of the market opening, investors lost Rs 11.78 trillion, showing the intensity of the rout. The total market capitalisation of all BSE-listed companies dropped to Rs 416.98 trillion at 10:23 am, down from Rs 428.76 trillion at Friday's close. The decline impacted all sectors. According to Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara, "The Indian benchmark indices have drastically dropped as a result of the growing sensitivity of the Indian market to geopolitical risks. Markets reacted to the increasing geopolitical risks surrounding Iran and the Strait of Hormuz, a key supply of the world's oil. Disruptions in this area can increase crude oil prices, increasing inflation expectations, the value of the currency, and the overall market sentiment of oil-dependent countries, especially India. The first hour of the market's opening eroded close to Rs 12 trillion rupees of the investors wealth, which shows how panicked investors are and how much wealth they're rushing to lose. A drop across almost all sectors, shows how the market isn't reacting to an underlying problem, it's reacting to perceived macro problems."

Stock Market Crash: Factors Behind The Sharp Fall

The current market decline is being driven by a mix of global and domestic factors, with geopolitical tensions at the centre.

1) Escalating Middle East conflict: The biggest trigger is the deepening conflict in the Middle East, now entering its fourth week. Rising tensions between the United States and Iran have unsettled global markets, particularly due to concerns around the Strait of Hormuz, a critical route for global oil shipments. Due to the uncertainty, investors are pulling back from equities and moving towards safer assets.

2) Crude oil surge adds to pressure: Crude oil prices have compounded the problem for markets, especially for an import-dependent economy like India.

Oil prices have surged over 50 per cent this month amid the ongoing conflict. The International Energy Agency has warned that the current situation could rival the oil shocks of the 1970s.

Higher crude prices typically:

• Push up inflation

• Increase input costs for companies

• Pressure profit margins

• Worsen fiscal and current account balances

All of these weigh on market sentiment.

3) Rupee hits record low: Currency weakness has further amplified investor concerns. The Indian rupee fell to a record low of 94 against the US dollar, breaching its previous low of 93.7350. The currency has depreciated roughly 3% since the conflict began, making it one of the worst-performing Asian currencies.

A weaker rupee creates a ripple effect:

• Makes imports, especially oil, more expensive

• Fuels inflation

• Triggers foreign capital outflows

• Raises the risk of tighter monetary conditions

4) Broad-based selling across sectors

The sell-off has been widespread, indicating panic-driven exits rather than isolated profit booking. Key losers in early trade.

5) Foreign investors continue to exit: Foreign Portfolio Investors (FPIs) have stepped up selling amid rising uncertainty. FPIs have sold over Rs 1 lakh crore worth of Indian equities since the conflict began. Outflows in March alone (till March 20) stand at around Rs 1,03,967 crore. A combination of high crude prices, a weakening rupee, and global risk aversion has made emerging markets like India less attractive in the short term.

6) Weak global cues deepen the rout: The sell-off is not limited to India. Global markets, particularly in Asia, have also come under pressure. Markets in countries such as Japan and South Korea have seen sharp declines, with some indices falling as much as 6 per cent. Investors globally are worried that prolonged geopolitical tensions could:

• Push global inflation higher

• Slow economic growth

• Delay interest rate cuts

What Should Investors Do?

For now, the market direction remains closely tied to global developments - particularly:

• Updates on the US-Iran conflict

• Movement in crude oil prices

• Currency trends

With uncertainty still high, volatility is likely to persist in the near term. Rather than reacting to sharp intraday moves, investors may be better off staying cautious and focusing on long-term fundamentals.

"The current uncertainty regarding geopolitical problems will continue to keep the market volatile. Investors need to avoid reactive behaviors by focusing on slower, more virile, and more fundamentally sound stocks. Close monitoring of crude oil prices and stock values on the import-dependent nation markets will continue to be the most important aspect of oil-based market forecasting," added Maurya.