India's equity market crashed again on Monday as tensions in West Asia show no signs of de-escalation. The BSE Sensex fell 1,837 points, or 2.46%, to end at 72,696, while the NSE Nifty50 declined 602 points, or 2.6%, to 22,512. Notably, this marked the lowest closing level since April 2025.
Investors' lost a staggering Rs 13.5 lakh crore within minutes as the overall market capitalisation of BSE-listed firms came down to Rs 415.21 lakh crore from Rs 428.76 lakh crore on Friday. The broader market witnessed severe damage, with both the Nifty Midcap 100 and Nifty Smallcap 100 indices falling about 4% each. Out of the Nifty 500 universe, only 15 stocks managed to close in positive territory, underlining the intensity and widespread nature of the sell-off across market capitalisations.
The fresh fall is attributed to geopolitical tensions turning for the worse during 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 throughout West Asia if the US attacks its power plants.
The escalation, now in its fourth week, has crippled shipments via the Strait of Hormuz, a chokepoint funnelling about 20% of global oil supply, 40% of India's oil import and a third of the liquefied natural gas trade. This has led to a sharp surge in crude oil and gas prices, with Brent crude prices trading between $110-115 a barrel.
Higher oil prices 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 fall in the Indian market also mirrored the trend in the Asian market as Japan's Nikkei 225, China's Shanghai Composite and South Korea's Kospi fell between 4% and 7% on Monday.
Currency markets also reflected stress, with the rupee depreciating 41 paise to a record low of 93.94 against the US dollar, pressured by elevated crude prices and persistent foreign outflows. According to NSDL data, total FII selling (net sales) through exchanges this month as of March 20th stood at a massive Rs 90,152 crores. FIIs were net sellers on all trading days in March.
Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, said that from a broader perspective, the ongoing correction has been both sharp and time-compressed. From its all-time high, the Nifty is now down by over 14%, with this decline unfolding in just 52 trading sessions, making it one of the steepest falls witnessed in recent periods.
The India VIX rose 19.1% to 27.17, its highest level since early June 2024, signalling elevated near-term uncertainty. Sectorally, all indices closed in the red.
"Technically, the structure remains weak, as all key moving averages are positioned above the current price, and momentum-based indicators continue to signal strong bearish bias, offering little evidence of near-term stabilisation," said Shah.
Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services concerns around potential disruptions in the Strait of Hormuz and threats to energy infrastructure heightened fears of supply shocks, keeping investors on edge. Precious metals corrected sharply, with gold down 8.5% and silver falling 12%, as rising US bond yields and a stronger dollar weighed on prices.
"The Fed's cautious stance amid inflation risks from elevated crude has pushed the US 10-year yield to around 4.4%, increasing the opportunity cost of holding non-yielding assets and triggering unwinding of long positions. Market chatter around liquidity needs in certain Gulf economies may have also added to selling pressure," added Khemka.
Tension in West Asia first escalated after US and Israeli forces targeted key Iranian sites on February 28. Iran swiftly responded with a barrage of ballistic missiles aimed at Israeli cities and important Middle East hubs such as Dubai, Kuwait, Qatar, Saudi Arabia and Bahrain. As of now, the two sides, the US-Israel coalition and Iran, continue to rain missiles and drones on each other.