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Indian equities weakened on Thursday as escalating tensions in West Asia dampened risk sentiment, offsetting the positive momentum seen at the start of the new financial year on Wednesday, April 1.
Nifty 50 declined 2.19 per cent to hit an intraday low of 22,182.55; meanwhile, Sensex also dipped 1,588 points to an intraday low of 71,545.81, down 2.17 per cent.
The weaknesses came on the heels of continued pressure from the West Asia crisis, where US President Donald Trump on Wednesday said the United States is “very close” to finishing its mission in Iran but warned that the country would be hit “extremely hard” over the next two to three weeks if no agreement is reached. He added that Iran’s electric infrastructure could be targeted in the absence of a deal, while asserting that Iran is “really no longer a threat” and that the US is on the cusp of ending what he described as Iran’s threat to America.
The geopolitical uncertainty has put emerging markets like India under tight scrutiny as Foreign Institutional Investors (FIIs) staged a record pullout in March, pulling out over Rs 1.14 lakh crore ($12–$13 billion)
Meanwhile, India VIX (Volatility Index India), a key market indicator that measures the expected volatility in the Indian stock market, specifically for the Nifty 50 index, over the next 30 days, was up over 4 per cent at 26.04 level.
Investor wealth saw a sharp erosion in a single day, with total market capitalisation falling from Rs 4,22,01,433.48 crore on April 1 to Rs 4,11,56,582.35 crore on April 2, translating into a loss of nearly Rs 10.45 lakh crore in investor wealth in just one trading session.
The market had a capitalisation of Rs 4,63,50,671.27 crore on February 27, indicating that nearly Rs 51 lakh crore of investor wealth has been wiped out during a one-month period amid sustained selling pressure and rising global and geopolitical uncertainties.
Foreign fund outflows remain a major drag on sentiment. Persistent selling by FIIs has continued to weigh on the market, as global investors trim their exposure to Indian equities amid elevated uncertainty and risk aversion.
Data from exchanges showed foreign portfolio investors continued their heavy selling streak, pulling out Rs 8,331.15 crore from Indian equities on April 1, 2026, as per exchange data. FPI sell orders worth Rs 26,289.22 crore far exceeded their purchases of Rs 17,958.07 crore, marking a sharp net outflow that has added to the sustained pressure on the markets.
In contrast, domestic institutional investors stepped in as stabilising buyers, recording a strong net inflow of Rs 7,171.80 crore on the same day, with total purchases of Rs 18,536.73 crore against sales of Rs 11,364.93 crore. The persistent FPI withdrawal amid global uncertainty has been a key factor amplifying volatility and deepening.
The steep decline in the domestic benchmark is led by rising tension in the Middle East triggered by ongoing tension between the US, Israel, and Iran. The US and Israel launched military strikes on Iran on February 28, killing Ayatollah Ali Khamenei. Following the killing of Iran’s supreme leader, the country announced his son, Mojtaba Khamenei as his successor.
The markets came under pressure as India remains deeply exposed to Middle East risks, sourcing 52–60 per cent of its crude oil imports from the region, with nearly 40 per cent of supplies passing through the vulnerable Strait of Hormuz. Any further escalation could directly affect domestic fuel prices, inflation, currency stability and overall growth, while heightened volatility may also dampen foreign portfolio inflows and weigh on the balance of payments.
The sharp spike in crude oil prices is adding to the market’s stress. Oil has jumped amid growing fears that the ongoing conflict could disrupt global supply chains and further strain availability. For India, which depends heavily on imported crude, the surge poses clear risks, from a higher import bill to renewed upward pressure on inflation.
Notably, Oil prices traded higher in early deals, supported by fresh commentary by US President Donald Trump on West Asia tension. Crude oil was up nearly 4 per cent at USD 103.8 a barrel, while Brent gained nearly 5 per cent to USD 105.5.
Earlier, Iran warned that oil prices could surge to USD 200 per barrel if attacks continue and exports get disrupted. Iran signaled through intermediaries that it would only consider a ceasefire if the US guarantees that neither it nor Israel would carry out future strikes, an assurance Washington is unlikely to provide. Adding to market anxiety, the strategically vital Strait of Hormuz remains effectively closed, with reports of multiple commercial vessels being hit off Iran’s coast.
On March 9, Brent crude surged over 27 per cent to trade at a multi-year high of USD 119 a barrel amid escalating Middle East tensions. The prices later dropped significantly after the announcement of coordinated oil reserve release by major G7 economies. The oil price, although at a multi-year high, was still lower than its all-time high of USD 147 per barrel seen in July, 2008. The recent hike was also lower than USD 130 per barrel price that was hit in 2022 during the Russia-Ukraine crisis.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
