Stock market crash: The Indian stock market witnessed a strong selloff on Monday, March 2, as escalating tensions in West Asia, or the Middle East, dealt a blow to already cautious market sentiment amid foreign capital outflows, geopolitical uncertainties, and unimpressive earnings.
The Sensex closed the day with a heavy loss of 1,048 points, or 1.29%, at 80,238.85, while the Nifty 50 settled at 24,865.70, losing 313 points, or 1.24%.
The BSE 150 MidCap Index fell 1.63%, while the BSE 250 SmallCap Index crashed 1.98%.
Investors lost more than ₹6 lakh crore in a single session as the overall market capitalisation of BSE-listed firms dropped to ₹457 lakh crore from ₹463.50 lakh crore in the previous session.
Why did the stock market fall? 5 key factors explained
Let’s take a look at 5 key factors behind the stock market crash today:
1. US-Iran war jitters
The market is fearing that the US-Iran war may escalate further and will spread to other parts of the region. Iran has strongly retaliated, launching missiles across the region after Iranian Supreme Leader Ayatollah Ali Khamenei and other senior officials were killed in attacks by the US and Israel.
Meanwhile, US President Donald Trump warned that the US will “avenge” the deaths of three US service members who were killed in Iran’s missile attack.
“America will avenge their deaths and deliver the most punishing blow to the terrorists who have waged war against, basically, civilisation,” Trump said in a video statement to Truth Social.
The conflict in West Asia began on 28 February when Israel and the US launched a joint attack on Iran.
“The medium-term impact on the market will depend on how long the conflict lasts. We don’t know the answer to this question. After crippling Iran, the US and Israel may make a strategic withdrawal,” V K Vijayakumar, Chief Investment Strategist, Geojit Investment, noted.
2. Crude jumps to multi-month high
Crude oil prices have jumped sharply to multi-month highs amid escalating tensions in West Asia. Reports suggest tanker damages and security risks near the Strait of Hormuz, disrupting shipments.
Crude futures surged more than 8% on Monday. Brent crude surged above $82 during the session, while West Texas Intermediate climbed to $75 a barrel. In over-the-counter trade on Sunday, Brent crude jumped 10% to about $80 a barrel.
A sharp jump in crude prices is a serious negative for the Indian economy and stock market sentiment, as it can widen India’s current account deficit, weaken the Indian rupee, raise inflation, and accelerate foreign capital outflows.
According to economists, a $10-per-barrel rise in crude oil prices may increase the import bill by roughly ₹10,000- ₹15,000 crore annually.
“Crude has spiked, and if the crude price remains high for an extended period of time, our balance of trade and balance of payments will be impacted since we import around 85% of our oil requirements,” Vijayakumar noted.
“OPEC Plus will scale up production and try to stabilise prices. If the Strait of Hormuz is closed, the crude price can spike further. Trump may forcefully reopen this. But that requires boots on the ground, which will escalate tensions further,” Vijayakumar added.
3. Rupee breaches 91 mark
The Indian rupee surpassed the 91 per dollar mark for the first time in one month amid turmoil in West Asia and a sharp jump in crude oil prices
According to PTI, the domestic currency crashed 44 paise to settle at 91.52 (provisional) against the US dollar.
A weaker rupee can simply translate into accelerated foreign capital outflow and a negative impact on corporate profitability due to increased input costs.
Experts expect the Reserve Bank of India (RBI) to intervene to stem the currency’s decline.
“The Indian rupee is expected to fall past the 91.30 per dollar mark after the U.S. and Israel bombed Iran over the weekend. We believe that the RBI will likely step in to avert a sharp slide in the rupee, which could put it back in touching distance of its all-time low of 91.9875 hit earlier in the year,” said Jigar Trivedi, Senior Research Analyst at IndusInd Securities.
4. FIIs press the sell button again
Dashing hopes of a shift in their investment strategy, foreign institutional investors (FIIs) appear to have resumed aggressive selling of Indian equities. In February, they sold stocks worth ₹11,002 crore in the cash segment. This marked their eighth consecutive month of net selling in Indian equities in the cash market.
Experts say further weakening of the rupee and a prolonged war in West Asia may mean more selling by FIIs.
5. Market discounting the macro effect of increased geopolitical risks
The Indian economy has remained resilient over the past several quarters due to healthy domestic demand, government capex and monetary easing. However, it appears that the market has started discounting the impact of geopolitical and geoeconomic risks on the Indian economy.
The Indian economy grew at 7.8% for the October-December quarter, the new GDP series released by the statistics ministry on Friday showed. The growth estimate for FY26 has risen to 7.6% from the 7.4% estimated in January.
However, weakness in nominal growth raises concerns. In nominal growth terms, GDP is expected to grow at 8.6% in FY26, compared to 9.7% in the same time a year ago.
“Nominal GDP growth for the year continues to remain below 9%, implying that while real activity is robust, the nominal backdrop — crucial for revenue buoyancy and profit growth — is relatively contained,” Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group, noted.
Fears have risen that elevated crude oil prices will increase inflationary pressure and force the central bank to turn hawkish.
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