This depends a lot on what the student is applying to. Being an instructor means you're qualified to assess the students' ability to do well in your class (and some related things like study skills and desire to learn), but not a lot else. For e.g. Ph.D. admissions, they really want someone to speak to the student's potential to do research, which you probably won't be seen as qualified to do. Thus is for two reasons - first, being somewhat early in your career yourself, you haven't established a ton of credibility by your own research career; second, you only know the student from class, not a research-related activity. Whether fair or not, I think in reality a well-known professor's recommendation will be taken much more seriously than yours, even if you know the student better. If you were a postdoc or other junior/non-permanent faculty the balances would tip a bit, but not having a graduate degree yourself is likely to make the reader be skeptical of your recommendation.
On the other hand, if the student is applying to a summer program or a job that isn't directly related to physics research, writing that they're a strong student who did well in your class and asked good questions and came to office hours or whatever is perfectly good. I have no idea how professional schools (med school etc) work but my guess is you'd be taken more seriously - it seems to me that their admissions process puts more emphasis on grades/class performance, which of course you're qualified to speak to!
I'm a PhD student and have been asked to write recommendations once or twice for students I've been the TA for (at my university, TA's are typically the only people interacting directly with the students in the larger classes). I have warned the students that I'm likely not the best person to ask and asked if they have even a tenuous connection to someone more senior, and helped them out if they can convince me I'm actually the best person for them.