Indian Stock Market Plummets Amid Middle East Tensions and New SEBI Regulations

Mumbai: Indian stock benchmarks faced a significant downturn on Thursday, marking the fourth consecutive session of losses. The decline was notably steep, driven by escalating tensions in the Middle East following Iran's recent missile attack on Israel.

The Sensex closed at 82,497.10 points, down 1,769.19 points or 2.10%, while the Nifty settled at 25,250.10 points, declining by 546.80 points or 2.12%. All sectoral indices experienced a drop, with realty, oil and gas, banking, automotive, and media sectors emerging as the hardest hit.

Vinod Nair, Head of Research at Geojit Financial Services, explained, "The domestic market took a sharp downturn following Iran's launch of ballistic missiles at Israel, sparking fears of retaliation and a potential escalation into war. This could drive up oil prices and create inflationary pressures."

Adding to the market's woes, new SEBI regulations for the Futures and Options (F&O) segment have raised concerns regarding reduced trading volumes across the broader market. With attractive valuations in China drawing foreign institutional investors (FIIs), Indian stocks are under additional pressure.

Retail investors have been experiencing losses in equity index derivatives, prompting SEBI to implement six measures aimed at strengthening the derivatives framework, including increasing the minimum contract size. These measures will be phased in starting November 20.

Ajay Bagga, a veteran financial market expert, highlighted that factors such as Chinese economic stimulus encouraging FII buying, geopolitical risks, and tightening F&O trade rules are key contributors to the market's recent decline. On Monday, the Sensex fell by over 1,000 points.

Prior to this downturn, support for Indian stocks had been bolstered by a significant 50-basis-point cut in the US Federal Reserve's interest rate policy. However, the potential for capital flight to alternative investment destinations, including India, continues to loom.

Despite the current turmoil, foreign portfolio investments in the Indian stock market have remained positive for the fourth consecutive month through September, providing some level of support to the stock indices.

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