India Stocks Plunge to 11-Month Low on War Fears

India's primary equity indices experienced a sharp decline of around 1% on Thursday, marking their lowest point in 11 months. This downturn, the second consecutive session of losses, was primarily driven by a surge in crude oil prices attributed to supply disruptions stemming from the US-Iran conflict. Brent crude futures climbed significantly, briefly crossing the $100 mark and settling near $97 on Thursday.

Analysts indicate that sustained high crude oil prices could exert continued pressure on investor sentiment, potentially leading to further declines in the market. Historically, during the Russia-Ukraine war in 2022, similar market reactions saw an approximate 11% drop. The current Nifty has already fallen around 6%.

Sector-specific performance reflected the broad market weakness. The Nifty Auto index saw a substantial drop of 3.2%, followed by the Nifty FMCG index at 1.8%. Other sectors like Banking, Private Banking, and Realty also registered declines.

The Volatility Index (VIX) increased by 2.2% to 21.5, indicating elevated market risk and a lack of immediate expectation for risks to subside. While some analysts suggest the market is oversold and a rebound is possible, caution is advised until crude oil prices stabilize.

Investors are advised to brace for potential further downside until crude oil prices find stability. The prevailing market sentiment is bearish, and any rallies might attract selling pressure, suggesting a period of caution for the Indian equity markets.