Sensex Drops 350 Points, Nifty Slips Below 24,650: Market Hit by Global Weakness, Crude Spike, and FII Outflows

Equity markets witnessed a sharp decline in early trade on Tuesday, weighed down by weak global cues, a spike in crude oil prices, continued foreign investor selling, and rising geopolitical tensions. Investors also remained cautious ahead of the Reserve Bank of India’s key policy decision later this week.

The Sensex fell by 349.75 points, or 0.43%, to 81,024.00, while the Nifty declined 82.85 points, or 0.34%, to 24,633.75.

Leading the losses were Coal India, Apollo Hospitals, Bajaj Finance, Hindustan Unilever, and Maruti Suzuki, with declines of up to 2%.

Key Factors Behind the Market Decline:

1. Sustained FII Selling

Foreign Institutional Investors (FIIs) remained net sellers, dumping shares worth Rs 2,589.47 crore on Monday alone. Persistent outflows are exerting downward pressure on the market.

2. Rising Crude Oil Prices

Brent crude climbed 0.57% to USD 65 per barrel, driven by limited output increases from OPEC+ and renewed geopolitical risks. As India imports over 85% of its oil, rising prices increase inflationary pressure and impact the fiscal balance.

3. Heightened Geopolitical Tensions

Renewed concerns in Eastern Europe and West Asia have rattled investor sentiment. Ukrainian President Zelenskyy threatened further drone attacks on Russia, while Iran is reportedly close to rejecting US nuclear proposals.

4. Global Trade Uncertainty

US-China trade tensions resurfaced after former President Donald Trump accused Beijing of backtracking on tariff rollback commitments. The US may raise tariffs on steel and aluminium to 50%, stoking fears of a fresh trade war.

5. Weak Global Market Cues

Wall Street futures traded in the red during early Indian hours, indicating a soft start for US markets. Investors are cautious amid a busy week of economic data and central bank decisions, including a potential ECB rate cut.

6. US Jobs Report in Focus

The upcoming US jobs data, expected to show an increase of around 130,000 payrolls in May with an unemployment rate of 4.2%, is likely to shape global market sentiment and bond yields.

7. RBI MPC Meeting Begins

The RBI’s Monetary Policy Committee began its three-day meeting on Tuesday, with the outcome due on June 6. While a rate pause is widely expected, markets will focus on the central bank's tone regarding inflation and liquidity management.

8. Rupee Weakens

The Indian rupee dropped 10 paise to 85.49 against the US dollar in early trade, pressured by high crude prices, foreign fund outflows, and a stronger dollar. Market jitters ahead of the RBI decision are also contributing to currency volatility.

9. Awaited US Economic Data

Investors are closely monitoring upcoming US manufacturing and services activity data, which will offer insight into the health of the US economy and inform expectations around future Federal Reserve policy moves.