The domestic stock market fell more than five per cent this week, marking its steepest weekly decline in nearly four years, driven by surging crude oil prices linked to the ongoing conflict in West Asia that has kept investors on edge. Since the crisis began late last month, companies listed on the BSE have collectively lost about Rs 34 lakh crore in investor wealth even as the benchmark stock indices have dropped roughly eight per cent.
On Friday, the Sensex index ended 1.9 per cent, or 1,470.50 points, lower at 74,563.92 points as foreign investors went on a selling spree. The Nifty 50 closed 2.1 per cent lower at 23,151.10 points.
Both the indices are currently trading around their lowest levels in around a year. Despite reaching record highs on a couple of occasions, both have been in a consolidation phase over the past 18-24 months. They are now near February 2024 levels.
The rupee also closed at a record low of 92.46, down 26 paise, against the dollar.
Foreign institutional investors pulled out Rs 10,716 crore (around $ 1.16 billion) from the cash market on Friday, according to exchange data. FIIs have taken out Rs 56,800 crore ($ 6.14 billion) in March so far.
Crude oil prices have remained above or around the $100 per barrel mark over the last few days as supply has been disrupted due to the conflict in West Asia. Refineries across key oil markets such as Iran, Qatar and the UAE have been hit as part of the conflict, forcing the shutdown of large capacities.
Iran has unofficially maintained a chokehold on the Strait of Hormuz, a key trade waterway through which 20-25 per cent of the global crude oil supply is transported. The Iranian military has also targeted multiple ships attempting to navigate through the waterway, including at least one India-bound ship.
The situation has led to a shortage of liquified natural gas in several parts of the country, and the potential impact of the exorbitant crude prices on corporate earnings have caused jitters in the market. Crude is among the most essential raw materials across a host of industries. It is also the biggest cost in India’s import bill, thus putting the rupee too under pressure against the dollar.
“While our forex reserves can help us to manage price risk, availability of energy supply is a challenge. Till there is visibility about the reduction in severity as well as length of the conflict, downward movement in the market is likely to persist,” said Nilesh Shah, MD and CEO of Kotak Mahindra Asset Management Company.
The benchmark equity indices — BSE’s Sensex and NSE’s Nifty 50 — may fall another 2-5 per cent from current levels if the war extends for another couple of weeks and crude prices remain above the $100 per barrel mark, according to G Chokkalingam, founder of Equinomics Research.
The India VIX index, which indicates volatility in the market, remained elevated on Friday. The index shot up almost 14 per cent during the week to levels last seen when US President Donald Trump first announced sweeping reciprocal tariffs in April 2025.
All sectoral indices of NSE ended deep in the red on Friday. Metals lost five per cent, while automobiles and public-sector banks fell nearly four per cent. Broader markets also closed the session in the red but fared better than the benchmark indices over the week. The NSE’s small-cap indices have fallen around four per cent over the week, while the mid-cap indices have lost around 4.5 per cent.
The underperformance is not limited to Indian markets, with high crude prices sending shockwaves across global bourses, too. The US markets have lost as much as two per cent over the week. Asian markets such as South Korea, Japan, and Hong Kong fell up to three per cent. This weakness in stock markets across the world is likely to persist until crude prices normalise.
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