India’s equity market witnessed heavy selling on Monday morning as Brent crude oil prices surged sharply after recent talks between the US and Iran failed to yield an agreement, and US President Donald Trump ordered the blockade of the Strait of Hormuz.
In intra-day deals, the benchmark BSE Sensex dropped 1,682 points or 2.1% to its day's low of 75,868.32, while Nifty fell 495 points or 2% to its intra-day low of 23,555.60.
As the session progressed, the market recovered from the day’s low and at the end of the trading session, Sensex settled 703 points or 0.91% lower at 76,847.57 while Nifty50 settled 208 points or 0.86% lower at 23,842.65.
The fresh nervousness in the market comes after the Sensex and the Nifty50, supported by a ceasefire in West Asia, gained nearly 6% each last week which was also their strongest weekly rise in percentage terms in five years (since February 5, 2021).
"Markets continue to derive limited support from last week’s ceasefire framework, which remains intact for now and is encouraging selective buying interest along with a buy-on-dips approach. This comes despite an initial negative reaction to the breakdown of US–Iran peace talks and the announcement of a US naval blockade in the Strait of Hormuz, which pushed crude prices above $100/bbl. Elevated oil prices are raising concerns around inflation, currency stability, and broader macro balances, thereby weighing on overall sentiment,” said Vinod Nair, Head of Research, Geojit Investments Limited.
Brent crude jumped 7.5% to trade above $102 per barrel following the development around the Strait of Hormuz. Meanwhile, the rupee traded weaker by 0.41% at 93.33, as rising crude prices continue to pressure the currency by increasing India’s import bill.
Analysts fear that higher oil prices for an import-dependent nation such as India are likely to translate into higher inflation in the coming months, exerting pressure on currency stability and corporate margins, thereby impacting overall equity market sentiment. The development around the Strait of Hormuz, where 20% of global crude oil and 40% of India’s crude oil imports transit, is expected to keep oil prices and the equity market volatile in the coming sessions.
“While the immediate impact on Q4 earnings is expected to be manageable, prolonged Middle East tensions could have more meaningful implications for Q1FY27. Volatility is likely to remain elevated, with markets closely tracking geopolitical developments alongside earnings quality and management commentary,” stated Nair. The volatility index, India VIX, rose by 8.75% to close at 20.50, reflecting a slight increase in market uncertainty after the previous session’s sharp decline.
Sector-wise, all major sectors finished in the red on Monday with Nifty Auto, Oil & Gas, and FMCG stocks seeing the steepest declines. Broader markets followed a similar trend, with the Nifty Midcap and Smallcap indices declining by 0.57% and 0.46%, respectively, largely in line with the benchmark indices.