India’s stock market experienced a significant downturn on Friday, with benchmark indices dropping nearly one percent, marking the worst weekly performance in over two years. The ongoing conflict in West Asia has prompted global investors to adopt a risk-averse stance, raising concerns about potential increases in oil prices.
Investor sentiment was further dampened by worries that foreign portfolio investors (FPIs) might withdraw their investments from India to capitalize on more attractive valuations in China. Over the past week, both the Sensex and Nifty indices plummeted approximately 4.5%, representing their largest decline since June 2022.
The Sensex fell for the fifth consecutive session, decreasing by 1% or 809 points to close at 81,689. Similarly, the Nifty index dropped by 0.9%, or 236 points, finishing at 25,015 after retreating more than two percent from its daily highs.
Market Capitalization Takes a Hit
The total market capitalization of companies listed on BSE decreased by Rs 4.2 trillion to Rs 461 trillion this week alone. This downward trend has resulted in a staggering loss of over Rs 16 trillion from India’s overall market capitalization during this tumultuous period.
In terms of volatility indicators, India VIX surged by 7.3% to reach a level of 14.1.
Contrasting Trends Abroad
In stark contrast to India’s performance, Hong Kong’s Hang Seng Index saw an impressive rise of around 10.2%, while Shanghai’s Composite Index climbed by approximately 8.1%. These gains were largely attributed to aggressive stimulus measures implemented by China’s central government aimed at revitalizing its economy.
Geopolitical Tensions Impacting Oil Prices
The escalating tensions between Israel and Iran have left investors anxious about potential repercussions for crude oil prices—a critical concern given that crude imports constitute a substantial portion of India’s import expenditures. While hostilities between Israel and Iranian proxies have been simmering for some time now, recent missile attacks launched directly from Iran towards Israel have heightened fears that these tensions could escalate into an all-out conflict.
Some analysts estimate that if Israel were to launch significant military operations against Iranian oil facilities, it could remove as much as one and a half million barrels per day from global supply chains.
Moreover, there are growing concerns that such actions could lead Iran to block access through the Strait of Hormuz—a vital maritime route responsible for transporting over one-third of the world’s crude oil supply—further exacerbating price volatility in international markets.
Brent crude prices surged dramatically—upward by approximately eleven point six percent over six trading sessions—to settle around $79 per barrel recently.
Global Implications and Local Concerns
Andrew Holland, CEO of Avendus Capital Public Market Alternate Strategies commented on these developments: “Depending on how Israel responds next will be crucial; there is widespread fear they may target Iranian oil assets which could provoke retaliation leading Iran to obstruct key maritime routes.” He added that such scenarios could drive oil prices up towards $100 per barrel globally—an outcome likely detrimental not only worldwide but particularly burdensome for India due its heavy reliance on imported energy resources amidst already high inflationary pressures fueled further still through adverse news cycles.”
Market Dynamics Reflect Investor Sentiment
Overall market breadth remained weak with significantly more stocks declining (2,387) compared with those advancing (1,563). Major contributors like HDFC Bank and Reliance Industries each saw declines around one point five percent contributing heavily toward losses reflected within Sensex figures; notably RIL—the nation’s most valuable company—has seen its stock drop over nine percent just within this past week alone amid rising investor pessimism regarding future prospects tied closely alongside increasing crude costs coupled alongside fund flows shifting toward cheaper alternatives like China according Vinod Nair head researcher at Geojit Financial Services who stated: “We expect bearish sentiment will persist short-term.”
On Friday alone FPIs sold off equities worth Rs nine thousand eight hundred ninety-seven crore while domestic institutions purchased shares totaling eight thousand nine hundred five crore indicating contrasting investment behaviors across different sectors; cumulatively throughout this week FPIs net sold equities valued near thirty-seven thousand eighty-eight crore whereas domestic institutions acquired shares amounting thirty-three thousand seventy-four crores marking highest levels recorded concerning FPI selling activity observed across twenty-four years’ timeframe reflecting broader trends impacting investor confidence moving forward into uncertain economic climate ahead.
Student at Government College of Engineering Kolkata and an enthusiastic Journalist. Follows Topics such as Indian Politics, Gaming, Anime, etc. Click on the bell icon for more news and opinions from Srijan.
