910
10 days ago
Indian stocks plummet to 14-month weekly low as Middle East goes on the boil
Summary
Mumbai: The Indian stock markets slumped to their weakest weekly performance in 14 months, after conflict erupted in the Middle East between the US, Israel and Iran on 28 February.
Benchmark indices NSE Nifty 50 and BSE Sensex dropped nearly 3% through the week, marking their steepest decline since the week ended 22 December 2024, when markets had corrected over 4% amid concerns over the US Federal Reserve’s hawkish stance and rising bond yields.
On Friday, the Nifty 50 fell 1.27% to close at 24,450.45, while the Sensex declined 1.37% to end at 78,918.88, extending their decline following the prior session’s relief rally.
Rising crude oil prices and continued selling by foreign portfolio investors (FPIs) weighed on sentiment. Currency weakness added further pressure, with the rupee hitting a record low of 92.1488 against the US dollar on 4 March (Wednesday).
Market volatility also spiked during the week, with the India VIX (Volatility Index)—a measure of the market’s expectation of volatility in the Indian stock market over the next 30 days—rising from 13.70 to 19.88, signalling heightened investor nervousness and expectations of larger market swings ahead.
To be sure, Indian equities’ fall was milder than several Asian markets. While the Nifty 50 fell about 3% during the week, South Korea’s Kospi dropped about 11%, Indonesia’s Jakarta Composite fell nearly 8%, and Thailand’s SET index declined around 7%. China’s Shanghai Composite Index slipped 1.1% for the week.
Meanwhile, key US market benchmark S&P 500 fell 0.7%, while the Nasdaq Composite rose 0.4%.
In India, the dim mood was reflected across sectors, with most indices ending the week in the red. The realty index was the worst performer, falling 4.9%, followed by oil and gas, which declined 4.85%, and Bankex — down over 4%. Capital goods, however, emerged as a rare pocket of resilience, edging up 0.23% during the week.
“The sectoral divergence suggests markets are beginning to price in a more prolonged conflict rather than a short-term shock,” said Tanvi Kanchan, associate director, Anand Rathi Share & Stock Brokers.
“Sectors such as aviation, logistics, auto, paints, chemicals and FMCG could remain under pressure, while defence and healthcare may stay relatively resilient,” Kanchan said, adding however that the market is not uniformly weak. “It is rotating with short term shocks providing areas and opportunities to enter in good sectors.”
A key trigger behind the volatility has been the sharp rise in crude oil prices. Brent crude gained nearly 18.5% in just over a week to touch a 52-week high of $87.6 per barrel on Friday, amid fears of supply disruptions around the Strait of Hormuz.
“India is particularly vulnerable to higher crude prices as it imports over 85% of its oil, though strong domestic liquidity, with SIP inflows exceeding ₹30,000 crore a month, is helping absorb foreign selling,” said Kanchan.
Foreign portfolio investors remained net sellers amid rising geopolitical uncertainty. NSDL data show FPIs withdrew over ₹23,000 crore from Indian equities between 26 February and 6 March, adding pressure on markets despite support from domestic institutional investors.
“The selling by foreign investors reflects a broader global risk-off sentiment, with investors reducing exposure to cyclical and higher-risk markets amid geopolitical uncertainty,” said Tarun Singh, managing director and founder of Highbrow Securities.
Despite the gloom, market participants say the recent correction appears largely sentiment-driven rather than structural.
Singh said the decline in the Nifty reflects a reaction to geopolitical tensions and the sharp rise in crude prices rather than a fundamental deterioration in the domestic economy.
“At this stage, the fall appears more like a corrective pause than the beginning of a deeper downturn. However, if geopolitical tensions persist and oil prices remain elevated for a prolonged period, market sentiment could remain fragile in the near term,” Singh said.
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Benchmark indices NSE Nifty 50 and BSE Sensex dropped nearly 3% through the week, marking their steepest decline since the week ended 22 December 2024, when markets had corrected over 4% amid concerns over the US Federal Reserve’s hawkish stance and rising bond yields.
On Friday, the Nifty 50 fell 1.27% to close at 24,450.45, while the Sensex declined 1.37% to end at 78,918.88, extending their decline following the prior session’s relief rally.
Rising crude oil prices and continued selling by foreign portfolio investors (FPIs) weighed on sentiment. Currency weakness added further pressure, with the rupee hitting a record low of 92.1488 against the US dollar on 4 March (Wednesday).
Market volatility also spiked during the week, with the India VIX (Volatility Index)—a measure of the market’s expectation of volatility in the Indian stock market over the next 30 days—rising from 13.70 to 19.88, signalling heightened investor nervousness and expectations of larger market swings ahead.
To be sure, Indian equities’ fall was milder than several Asian markets. While the Nifty 50 fell about 3% during the week, South Korea’s Kospi dropped about 11%, Indonesia’s Jakarta Composite fell nearly 8%, and Thailand’s SET index declined around 7%. China’s Shanghai Composite Index slipped 1.1% for the week.
Meanwhile, key US market benchmark S&P 500 fell 0.7%, while the Nasdaq Composite rose 0.4%.
In India, the dim mood was reflected across sectors, with most indices ending the week in the red. The realty index was the worst performer, falling 4.9%, followed by oil and gas, which declined 4.85%, and Bankex — down over 4%. Capital goods, however, emerged as a rare pocket of resilience, edging up 0.23% during the week.
“The sectoral divergence suggests markets are beginning to price in a more prolonged conflict rather than a short-term shock,” said Tanvi Kanchan, associate director, Anand Rathi Share & Stock Brokers.
“Sectors such as aviation, logistics, auto, paints, chemicals and FMCG could remain under pressure, while defence and healthcare may stay relatively resilient,” Kanchan said, adding however that the market is not uniformly weak. “It is rotating with short term shocks providing areas and opportunities to enter in good sectors.”
A key trigger behind the volatility has been the sharp rise in crude oil prices. Brent crude gained nearly 18.5% in just over a week to touch a 52-week high of $87.6 per barrel on Friday, amid fears of supply disruptions around the Strait of Hormuz.
“India is particularly vulnerable to higher crude prices as it imports over 85% of its oil, though strong domestic liquidity, with SIP inflows exceeding ₹30,000 crore a month, is helping absorb foreign selling,” said Kanchan.
Foreign portfolio investors remained net sellers amid rising geopolitical uncertainty. NSDL data show FPIs withdrew over ₹23,000 crore from Indian equities between 26 February and 6 March, adding pressure on markets despite support from domestic institutional investors.
“The selling by foreign investors reflects a broader global risk-off sentiment, with investors reducing exposure to cyclical and higher-risk markets amid geopolitical uncertainty,” said Tarun Singh, managing director and founder of Highbrow Securities.
Despite the gloom, market participants say the recent correction appears largely sentiment-driven rather than structural.
Singh said the decline in the Nifty reflects a reaction to geopolitical tensions and the sharp rise in crude prices rather than a fundamental deterioration in the domestic economy.
“At this stage, the fall appears more like a corrective pause than the beginning of a deeper downturn. However, if geopolitical tensions persist and oil prices remain elevated for a prolonged period, market sentiment could remain fragile in the near term,” Singh said.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Download the Mint app and read premium stories
AI Description
The article discusses the significant decline in Indian stock markets due to geopolitical tensions in the Middle East. It highlights the impact of surging crude prices, foreign portfolio investor (FPI) outflows, and a weakening Rupee on investor sentiment.