Indian equities plunged alongside global peers on Thursday, with benchmark indices posting their steepest falls in nearly two years, as a renewed surge in oil prices fuelled fears that the escalating Iran war could stoke inflation and undermine economic growth. 

The BSE Sensex ended the session at 74,207, down 2,497 points, or 3.3 per cent. The Nifty closed at 23,002, a decline of 776 points, or 3.3 per cent. Both indices recorded their worst fall since June 4, 2024. The market capitalisation (mcap) of BSE-listed firms declined by ₹13 trillion to ₹426.1 trillion.

All sectoral indices on the National Stock Exchange (NSE) closed in the red, with losses ranging between 1.4 per cent (Nifty Energy) and 4.25 per cent (Nifty Auto). The Nifty 100, Nifty 500, Nifty Midcap 50, and Nifty Midcap 100 indices reported declines of more than 3 per cent each, and Nifty Smallcap index fell 2.9 per cent. Since the start of the war, the Sensex is down 8.7 per cent and the Nifty 8.6 per cent.

The total mcap of BSE-listed firms has fallen by ₹37.4 trillion during this period. 

The selloff on Thursday came as crude oil prices surged in the wake of attacks on some of West Asia’s most important energy facilities. Brent crude was trading at $108.5 per barrel (as of 9 pm IST) on Thursday, having earlier hit an intraday high of $119. Since the breakout of the war, crude oil prices have risen by 49 per cent. 

Saudi Arabia on Thursday reported that a drone struck its Samref refinery on the Red Sea, following an earlier Israeli strike on the South Pars gas field, which Iran shares with Qatar. Higher oil prices tend to push up inflation in India and hurt economic growth, as the country imports most of its crude oil requirements. 

“The conflict has increasingly taken the shape of energy warfare, with attacks on critical infrastructure by both sides driving a sharp spike in crude oil prices and rattling investor confidence. Going ahead, markets appear to be in a phase of heightened fragility, where sentiment is being driven by rapidly evolving geopolitical developments and a sharp rise in crude prices,” said Siddhartha Khemka, head of research, wealth management, Motilal Oswal Financial Services. “Given the intensifying tensions around energy infrastructure in West Asia, we remain cautious on the market in the near term and expect volatility to persist.” 

The India Vix, a gauge of market volatility, rose 22 per cent to 22.8 points. HDFC Bank, which declined 5.1 per cent, was the biggest drag on the Sensex. The private lender’s stock posted its worst fall since June 4, 2024, after its chairman resigned citing ethical differences. 

Going ahead, the 23,170-23,200 zone is expected to act as immediate resistance for the Nifty 50. “As long as the Nifty 50 continues to trade below 23,200, downside pressure is likely to persist. In such a scenario, the index may drift towards 22,850, followed by the 22,700 level, in the short term,” said Sudeep Shah, head (technical and derivatives research) at SBI Securities.