The Indian stock market came under intense selling pressure on Wednesday as the escalating conflict in the Middle East unsettled investors, triggering sharp volatility across global asset classes. The US–Israel–Iran war pushed crude oil prices higher on supply disruption concerns, while boosting safe-haven demand for gold and silver.
Domestic benchmark indices extended losses and slipped below key technical levels. The BSE Sensex declined 1,456.79 points, or 1.82%, to 78,782.06, while the Nifty 50 fell 484.85 points, or 1.95%, to 24,380.85. The Bank Nifty dropped 2.25% to 58,491.20.
Broader markets mirrored the weakness. The Nifty Smallcap 100 and the Nifty Midcap 100 indices declined more than 2.7% each, while the India VIX, a gauge of market volatility, surged over 23%, reflecting heightened investor anxiety.
Sectorally, the sell-off was broad-based. The Nifty Metal, Nifty Realty, and Nifty PSU Bank indices tumbled over 4% each. The Nifty Auto, Nifty Media, and Nifty Oil & Gas fell more than 3% apiece.
Crude Oil Surge and Inflation Risks
Crude oil prices rallied sharply amid fears of potential supply disruptions in the Middle East, intensifying concerns over imported inflation for oil-dependent economies such as India. The Middle East region remains on edge following escalating missile and drone strikes, deepening hostilities after the reported killing of Iranian Supreme Leader Ayatollah Ali Khamenei.
In the latest updates on US-Israel-Iran war, Israel said it carried out fresh strikes in Tehran and Beirut. Earlier, two drones — reportedly launched from Iran — struck the US embassy in Riyadh, causing minor damage and triggering a fire.
Crude oil prices are expected to remain elevated in the near term as traders weigh the risk of supply disruptions through the Strait of Hormuz, a critical transit route for more than 20% of global oil supply.
Brent crude oil price jumped 3.05% to $83.88 a barrel, while the US West Texas Intermediate (WTI) crude futures gained 2.82% to $76.66.
Every $1 increase in crude oil prices raises India’s annual import bill by approximately $2 billion. Data indicate that a 10% rise in crude prices could raise the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) by 40 to 80 basis points, while widening the current account deficit by approximately 30-40 basis points.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted that the impact of potentially widening trade deficit, depreciating currency, higher inflation and perhaps lower growth is the real issue.
“If this fear materialises, corporate earnings will be impacted. This is the fear in the market. This fear will materialise only if the war lingers for long. If it ends in, say 3 to 4 weeks, things will be back to normal,” said Vijayakumar.
According to Devarsh Vakil, Head of Prime Research at HDFC Securities, sectors beyond energy — including paints, lubricants, aviation, and chemicals — are likely to face margin pressure, as oil and its derivatives account for 40% to 70% of their raw material costs.
Nifty 50 During Major Global Conflicts
Historical data compiled by Anand Rathi shows that during major global conflicts, the median return of the Nifty 50 during full war periods remained positive, while the median drawdown during intense phases was around 4%.
“Foreign Portfolio Investors (FPIs) recorded net inflows in most episodes, with notable exceptions during global tightening cycles (eg, 2022). One-month realized volatility rose temporarily but reverted quickly. This suggests Indian equities are more sensitive to global monetary conditions and domestic macro fundamentals than to geopolitical developments per se,” said Anand Rathi.
Nifty 50 Technical View
Sensex and Nifty 50 continued their descent below their respective 200-day moving average on account of the fluid situation unfolding in West Asia.
“The zone of 24,270 – 24,250 will act as a crucial support for the Nifty 50 index while the resistance lies in the zone of 24,480 – 24,500 zone. On the downside, if the Nifty 50 index slips below the level of 24,250, then the next support is placed in the zone of 24,120 – 24,100. In the event of a surge above 24,500, the index can experience an extension of the rally towards 25,650,” said Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities.
On the Nifty 50 options front, meaningful call writing witnessed across 24,400 and 24,500 strikes. On the put side, 24,300 has a substantial open interest, followed by 24,200 strike.
Nifty’s Advance Decline Ratio is at 3:47, while the Nifty’s PCR is currently at 0.72.
Speaking of Sensex levels, Shah said the support lies at 77,300 and resistance is at 78,100.
Stock Market Strategy
Historical evidence does not indicate a high probability of deep or sustained correction in the Indian stock market purely on geopolitical grounds. Short-term 5–7% corrections, temporary FPI outflows and volatility spikes remain plausible under heightened uncertainty.
“Structural market damage would require a prolonged crude oil shock materially widening the current account deficit and reigniting inflation pressures. Absent such a scenario, the pattern has been consistent: early shock, rapid repricing, subsequent stabilization,” said Anand Rathi.
Dr. VK Vijayakumar said that panicking and getting out of the market during uncertain times like these is not the right thing to do.
“Markets have an uncanny ability to surprise and climb all walls of worries. So remain invested and wait patiently. Investors with a high risk appetite and long investment horizon can use this crisis to nibble at high quality stocks. Banking, pharmaceuticals, automobiles and defense themes will offer long-term buying opportunities,” he added.
Morgan Stanley said that the Indian stock market continues to react more to bad than good news, creating doubt that structural problems are surfacing for India.
“We think this is more adverse market plumbing and an opportunity to buy high-quality businesses at reasonable prices despite the potential for near-term volatility,” said Morgan Stanley.
It prefers Domestic Cyclicals over Defensives and External-facing sectors, and remains overweight on Financials, Consumer Discretionary, and Industrials. The brokerage firm is overweight on Energy, Materials, Utilities, and Healthcare.
“We are capitalization-agnostic,” it said.
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