India’s equity market fell sharply again on Monday as tensions in West Asia showed no signs of de-escalation. In early morning deals, the BSE Sensex nosedived more than 1,550 points, or over 2%, to 72,977, while the NSE Nifty50 plunged nearly 500 points, or over 2%, to 22,634.
Investors lost a staggering Rs 8 lakh crore within minutes, as the overall market capitalisation of BSE-listed firms dropped to Rs 421 lakh crore from Rs 429 lakh crore on Friday.
The fresh fall is attributed to geopolitical tensions worsening over the weekend, as US President Donald Trump issued a stark ultimatum warning of strikes on Iran’s power grid unless Tehran restores access to the Strait of Hormuz. Iran retaliated with threats to target critical infrastructure across West Asia if the US attacks its power plants.
The conflict, now in its fourth week, has disrupted shipments via the Strait of Hormuz—a crucial chokepoint that handles about 20% of global oil supply, 40% of India’s oil imports, and one-third of the global liquefied natural gas trade. This disruption has led to a sharp surge in crude oil and gas prices, with Brent crude trading between $110 and $115 per barrel.
Higher oil prices are likely to translate into increased inflation in the coming months, putting pressure on currency stability and corporate margins, thereby impacting overall equity market sentiment. The decline in the Indian market also mirrored global trends, with Japan's Nikkei 225, China’s Shanghai Composite, and South Korea's Kospi falling between 2% and 6% on Monday.
Meanwhile, the rupee plummeted 18 paise to a record low of 93.8925 against the US dollar in early trade on Monday, amid concerns that oil prices may rise further. Relentless selling by foreign institutional investors (FIIs) has continued to add pressure on both the currency and the equity market.
According to NSDL data, total FII net selling through exchanges so far in March stood at a massive Rs 90,152 crore. FIIs have been net sellers on all trading days this month.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said that with the war in West Asia entering its fourth week, there is no clarity on when it will end.
“Unfortunately, the conflict is escalating, with President Trump giving an ultimatum to Iran to open the Strait of Hormuz within 48 hours. The Iranian president’s response that ‘the Strait of Hormuz is open to all except those who violate our soil’ has prevented panic in the oil market. However, uncertainty remains high, and markets will be closely watching the outcome,” he added.
He further stated that the global risk-off sentiment has impacted all asset classes, including stocks, bonds, and precious metals like gold and silver. In fact, the decline in safe-haven gold has been sharper than in equities. MCX gold opened 3% lower at Rs 1,40,158 per 10 grams on Monday and fell to a low of Rs 1,36,403.
“There is little that investors can do during a crisis characterised by such high uncertainty. If history is any guide, investors should avoid panic and remain calm,” the analyst said.
Tensions in West Asia first escalated after US and Israeli forces targeted key Iranian sites on February 28. Iran responded swiftly with a barrage of ballistic missiles aimed at Israeli cities and key Middle Eastern hubs such as Dubai, Kuwait, Qatar, Saudi Arabia, and Bahrain. As of now, both sides, the US-Israel coalition and Iran, continue to launch missiles and drones at each other.