Stock Market Crash: Tsunami in the stock market; Market crashed due to these five big reasons

The Indian stock market continues to decline for the third consecutive trading session. Today both the major indices i.e. Sensex and Nifty are trading with a decline of more than 2 percent. Earlier on Tuesday, there was a slight decline in the market. On Monday also, both the indices closed with a decline of about one and a half percent. Let us understand what is the reason for the continuous decline in the Indian stock market.

Markets scared by Iran-Israel war

The fight between Iran and Israel is likely to affect the markets of the whole world. Israel is fighting a war on many fronts simultaneously. Its army is clashing with Hezbollah in Lebanon, Hamas in Gaza, Houthi rebels in Yemen, as well as Syria and Iran. The Iran-Israel war heated up on Tuesday and there was a big decline in the US stock market that day. Since the Indian market was closed on October 2 due to Gandhi Jayanti, the effect of the war is visible today.

Risk of impact on crude supply chain

There is a fear of the supply chain being affected along with the fluctuations in crude oil prices due to the Israel-Iran war. India also has deep trade relations with both Israel and Iran. Israel is India's partner in technology matters, while Iran is a major oil producer. Also, India exports basmati rice, tea, coffee and sugar to Iran on a large scale. If the Israel-Iran crisis deepens, it can have a bad effect on the business of many companies. Especially, companies related to import and export.

This is the reason why investors are now turning to gold, leaving more volatile assets like the stock market. Gold is considered the safest investment and it acts as an effective weapon against inflation.

Impact of changes in F&O rules

Market regulator SEBI has made some new and strict provisions for futures and options (F&O) trading. According to SEBI's circular, the contract size rules will come into effect from November 20 and there will be only one weekly expiry in a week in each exchange. At the same time, from February 1, benefits like upfront premium and calendar spread will be abolished for option buyers.

The minimum trading amount for derivatives has been fixed at Rs 15 lakh. It will later be between Rs 15 lakh and Rs 20 lakh. Securities Transaction Tax (STT) has also been doubled from October 1. Due to all this, the sentiment of investors trading in F&O has weakened a bit and its effect is also visible on the market.

High valuation of Indian stock market

The Indian stock market has been in a bull run for a long time. If we leave aside some occasions like the day of the results of Lok Sabha elections 2024, then there has been no major correction in it. Market experts believe that the Indian stock market valuation is very high at this time. In such a situation, there is a constant possibility of bubble bursting in the near term. However, often after a big fall, mutual funds and retail investors handle the market by buying.

Also, Foreign Institutional Investors (FIIs) are now withdrawing money from India and turning to markets like China, which is relatively cheaper. The Chinese government has given a big boost to its real estate sector. This has also increased the growth prospects there a lot. China's Shanghai Composite closed with a jump of more than 8 percent on Monday (30 September). Since then the market there is closed for the entire weekend due to holidays.

Weak signals from global markets

Due to geopolitical tensions in the Middle East, stock markets around the world are in a downward trend. All three major US indices - Dow Jones, Nasdaq Composite and S&P 500 closed almost flat. On the other hand, talking about Asian markets, Hong Kong's Hang Seng Index is trading in the red. Shanghai Composite will remain closed till October 8 due to national holiday. At the same time, South Korea's market is closed due to National Foundation Day.

Japan's Nikkei 225 has certainly risen by 2 percent, but it had already fallen a lot due to the political changes and is currently in recovery mode. Now the mood of investors around the world will be on the US employment and non-farm payroll report coming on October 4 along with the data.