Indian equity markets have witnessed a sharp erosion in investor wealth since the United States-Israel conflict with Iran escalated on February 28, triggering heightened volatility across global financial markets amid concerns over potential disruptions to energy supplies.

The tensions have intensified as Iran stepped up retaliatory strikes. In his first public remarks since taking office as Iran’s supreme leader, Mojtaba Khamenei said the strategic Strait of Hormuz should stay closed, a move likely to heighten regional tensions and pressure global energy flows. “Vows to avenge martyrs, keep strait closed,” Khamenei said.

Against this backdrop, benchmark equity indices have come under sustained pressure. Since the conflict began around two weeks ago, the BSE Sensex and NSE Nifty50 have declined 7.6 per cent and 7.4 per cent, respectively.

The sharp correction has led to significant destruction of investor wealth. The market capitalisation (mcap) of all BSE-listed companies has declined by over ₹29.54 trillion during the period. The total market value stood at around ₹463.26 trillion (February 27, 2027) before the escalation. 

On Friday, March 13, the Sensex fell about 964 points to an intraday low of 75,070.44, while the Nifty50 declined 333 points to 23,305.75, its lowest level since April 2025. As of 12 PM on March 13, the mcap of BSE-listed companies stood at ₹434.25 trillion, down ₹5.46 trillion from ₹439.72 trillion on March 12.

In just the past week, the total mcap of BSE-listed companies has fallen by about ₹15.9 trillion from ₹449.35 trillion on March 6.

Within the Sensex pack, according to Ace Equity data as of March 12, State Bank of India saw the sharpest erosion in mcap at around ₹1.07 trillion, followed by HDFC Bank (₹84,493 crore), Bajaj Finance (₹82,728 crore), ICICI Bank (₹80,747 crore), and Larsen & Toubro (₹76,979 crore).

In contrast, Coal India added around ₹24,312 crore in mcap, followed by Sun Pharmaceutical Industries (₹20,850 crore), NTPC (₹8,485 crore), Bharat Electronics (₹6,798 crore), and Power Grid Corporation (₹4,604 crore).

Here’s why markets are falling:

Global markets fall: With the heightened uncertainty surrounding the West Asian conflict continuing, global markets are weak. In Asian markets, South Korea’s benchmark Kospi, Japan’s Nikkei 225 index, Shanghai’s SSE Composite index and Hong Kong’s Hang Seng index were trading lower. Overnight, Dow Jones closed with a loss of 740 points at 46,677.85 — the first instance when the 30-share blue-chip index fell below the 47,000 mark in 2026. The S&P 500 and Nasdaq dropped more than 1.5 per cent each. 

According to Vijayakumar, weakness in the US markets indicates that a rebound in the market is some time away.

Oil stays above $100: The ongoing conflict in West Asia and surging oil prices continue to spoil investors’ sentiment. Brent crude, the global oil benchmark, was hovering around $100 per barrel. Notably, sustained high oil prices pose risks for India’s economy, raising the import bill and thus widening the CAD.

According to Axis Securities, India imports nearly 85 per cent of its crude oil requirement, making the economy highly sensitive to global oil price movements. A sustained increase in crude oil prices influences multiple macro variables, including inflation, interest rates, currency movement, the current account deficit, and overall corporate profitability. Historically, sharp oil price increases have triggered inflation spikes, rupee depreciation, and pressure on oil-dependent sectors.

FII selling: Persistent selling by foreign investors has added to the bearish trend. On Thursday, FIIs offloaded equities worth Rs 7,049.87 crore. Back on Wednesday, Tuesday and Monday, FIIs sold shares worth ₹6,267.31 crore, ₹4,672.64 crore, and ₹6,345.57 crore, respectively.

Vijayakumar said that with the FIIs persisting with their sustained selling strategy, even largecap bluechips are under pressure.

Inflation data: Retail inflation moved up to 3.21 per cent in February compared to 2.74 per cent in the preceding month, driven mainly by higher food prices, government data released on Thursday showed.

Rupee at record low: The rupee hit a fresh all-time intra-day low of 92.44 against the US dollar on Friday, down 19 paise from its previous close. The Indian currency is consistently under pressure due to rising global crude oil prices, strong greenback and persistent FII outflows. 

  The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.04 per cent higher at 99.77.

Nifty outlook

According to SBI Securities, for Nifty, the zone of 23,320-23,300 will act as a crucial support for the index while the resistance lies in the zone of 23,530-23,550 zone.

“On the downside, if the index slips below the level of 23300 then the next support is placed the zone of 23,170-23,150. In an event of a surge above 23,550, the index can experience an extension of the rally towards 23,700. Speaking of Sensex levels, support is at 74,900 while resistance is at 75,700,” the brokerage said.