Domestic equities and the rupee tumbled on Monday as escalating tensions in West Asia and fears of prolonged disruption to oil supplies weighed heavily on investor sentiment and raised concerns over the impact on economic growth.
However, sentiment improved after the market hours when US President Donald Trump said the US and Iran had held “productive talks”. This triggered a sharp rebound in global markets and in Nifty futures traded in GIFT City.
Brent crude prices, which had surged amid supply fears, fell 10 per cent intraday to $96 per barrel, though they remain about 30 per cent above pre-conflict levels.
The selloff in domestic equities followed Iran’s response to Trump’s ultimatum to reopen the Strait of Hormuz, with fresh attacks reported across the Persian Gulf, intensifying concerns over energy supplies and inflation.
The Sensex ended at 72,696, down 1,837 points, or 2.5 per cent, while the Nifty closed at 22,513, declining 602 points, or 2.6 per cent. The Sensex closed at its lowest level since June 2024, while the Nifty recorded its lowest close since April 2024. Several index components hit fresh 52-week lows.
The disruption in the Strait of Hormuz — a critical chokepoint that handles nearly a fifth of global oil trade — has triggered one of the sharpest energy shocks in recent years. For India, a major crude importer, sustained high prices pose significant macroeconomic risks. The rupee has weakened 3.2 per cent against the US dollar since the conflict began, hitting a record low of 93.97.
On Monday, market capitalisation fell by ₹14 trillion to ₹415.2 trillion, the lowest since April 16, 2025. Market breadth remained weak on the BSE, with 3,858 stocks declining and only 581 advancing. All sectoral indices ended in red, with losses ranging between 0.2 per cent for the information technology (IT) index and 4.8 per cent for the metal index. The India Vix surged 17.2 per cent to hit a nine-month high of 26.7, while the broader Nifty small and midcap 100 indices dropped 4 per cent.
All Sensex constituents, barring three, ended lower. HDFC Bank, which declined 4.7 per cent, dragged the Sensex down by 473 points.
Global equity markets have also been under pressure over the past four weeks, as elevated oil prices stoke fears of persistent inflation and slower economic growth. However, most markets staged a rebound after Trump signalled possible de-escalation in the Iran conflict.
Over the weekend, Trump warned Iran to reopen the strait or face strikes on its power infrastructure, while Iran threatened retaliatory attacks on critical facilities across the region.
Domestic markets are expected to rebound on Tuesday, though gains could be capped.
“What we are seeing in GIFT Nifty futures could be an overreaction. The conflict is far from over; unless there is clear de-escalation from both sides, uncertainty will persist,” said U R Bhat, cofounder of Alphaniti Fintech.
Following the market fall this month, the Nifty 50 index now trades at 17.1 times its projected 12-month forward earnings, down from the five-year average of 19.6 times.
Some market participants believe current valuations offer a good buying opportunity. “The Indian economy is well-positioned to absorb a rise in oil & gas prices. The impact on corporate earnings should be limited and transient. The recent 10-15 per cent correction in largecaps and deeper cuts in mid and smallcaps provide room for re-rating. A 12 per cent earnings compound annual growth rate remains a strong tailwind,” Prashant Jain, chief investment officer at 3P Investment Managers, wrote in a newsletter.
