Summary of this article
Sensex and Nifty fell as global risks and crude prices surged
Iran tensions and Trump's tariff plan hurt investor sentiment and pharma stocks
Investors should track crude oil, Fed decisions and FPI flows going ahead
Equity benchmark indices plunged in the session on July 22 as investors turned cautious amid rising geopolitical tensions in West Asia, higher crude oil prices and fresh trade policy concerns from the US.
The BSE Sensex fell 715.06 points, or 0.92 per cent, to settle at 76,755.05, while the NSE Nifty 50 declined 191.45 points, or 0.79 per cent, to close at 23,996.25, slipping below the 24,000 mark. The broader market also came under pressure, with mid- and small-cap stocks extending losses as selling spread across sectors.
The decline erased around Rs 4.10 lakh crore from investors' wealth, taking the total market capitalisation of BSE-listed companies to Rs 480.11 lakh crore.
Among the Nifty 50 stocks, Bajaj Auto and Nestle India gained 5.92 per cent and 3.31 per cent, respectively, emerging as the top gainers. Following these, Tata Consumer Products, Eternal (formerly Zomato), Power Grid, ONGC, Hindustan Unilever, NTPC, Titan, and Apollo Hospitals were other gainers. On the other hand, InterGlobe Aviation, the parent company of IndiGo Airlines, Dr Reddy's Laboratories, Jio Financial Services, and Infosys, emerged as the biggest losers, falling between 2 per cent and 3.60 per cent.
Sector-wise, only the Nifty Auto and Nifty FMCG indices ended in the green. The Nifty Media, Realty and PSU Bank indices witnessed the biggest declines. Nifty Bank, which tracks 14 of the biggest and most actively traded banks, also declined 1.23 per cent to settle at 57,126.80.
The selloff was broader than just the benchmark indices. The Nifty Midcap 100 fell 1.09 per cent, while the Nifty Smallcap 100 declined 1.54 per cent. The Nifty 500, which represents more than 92 per cent of the free-float market capitalisation of all the NSE-listed stocks, closed 0.89 per cent lower, indicating a broad-based sell-off.
Why Stock Market Fell Today
Here are the key reasons why the stock market fell on July 22.
Escalating Iran-US Tensions
Investor sentiment weakened after tensions between Iran and the US intensified further. Three tankers carrying Saudi Arabian crude bound for China and India changed course in the Red Sea on July 21, renewing concerns over oil supply disruptions.
The market is also watching developments around the Strait of Hormuz, one of the world's busiest oil shipping routes. Any disruption there could affect global crude supplies and push prices even higher.
Crude Oil Extends Rally
Following the abovementioned development in West Asia, crude oil prices scaled back to their six-week highs.
Brent crude rose above the $94-a-barrel mark, while WTI crude traded above $87, both the benchmarks gaining nearly 4 per cent each, raising concerns over India's import bill and inflation outlook.
India imports more than 85 per cent of its crude oil demand. Higher oil prices generally increase input costs for companies, widen the current account deficit and delay interest rate cuts, making equities less attractive.
Trump's Tariff Plan Hits Pharma Stocks
Pharmaceutical shares were among the biggest losers after US President Donald Trump announced a phased tariff plan on imported generic medicines. According to the proposal, generic drug imports would remain tariff-free for two years before facing a 100 per cent duty for one year and a 200 per cent tariff thereafter.
The announcement triggered selling across major pharma counters as investors assessed the possible impact on exports to the US, the industry's largest overseas market.
Rising Expectations Of US Fed Rate Hike
Global investors also turned cautious after expectations of another US Federal Reserve rate hike gained ground.
Traders have increased their bets that the US Federal Reserve could raise interest rates at its July 29 policy meeting. According to the Chicago Mercantile Exchange's (CME) FedWatch tool, markets are pricing in a 26.20 per cent probability of a 25-basis-point rate hike, up from 25.70 per cent a day earlier and 10.70 per cent a week ago. The Fed's benchmark policy rate currently stands in the 3.50-3.75 per cent range.
Higher US interest rates typically reduce the appeal of emerging markets by increasing returns on dollar-denominated assets. That often leads to foreign capital moving out of riskier markets, including India.
Higher US bond yields
US Treasury yields moved higher, making fixed-income investments more attractive in relation to equities. When bond yields rise, global investors often rebalance their portfolios by reducing exposure to equities, especially in emerging markets.
The yield on the benchmark US 10-year Treasury note rose to 4.63 per cent on July 22. It has gained 2.80 per cent over the past week.
Weak Rupee
The rupee (INR) weakened against the dollar (USD) as higher crude prices boosted demand for the greenback. The USD/INR pair was trading at 96.69 against the greenback, down 0.48 per cent from the previous close.
A weaker currency increases the cost of imports and can put pressure on corporate earnings, particularly for companies that rely heavily on imported raw materials.
What Should Investors Watch Now
Markets are likely to remain sensitive to developments in West Asia, as any further escalation could keep crude oil prices elevated and weigh on investor sentiment. Investors will also track signals from the US Federal Reserve on interest rates, the rupee's movement against the dollar and foreign portfolio investor (FPI) flows for cues on the market's near-term direction.
Ajit Mishra, senior vice president, research at Religare Broking, in his post-market note, said the broader market continues to offer stock-specific opportunities despite the weakness in the benchmark indices. He advised investors to remain cautious, focus on fundamentally stronger stocks and follow disciplined risk and position management.
