Indian stock markets have seen a massive selloff recently, as fresh escalations in the ongoing conflict between Iran and Israel-US raised worries over a further rally in oil prices. Analysts expect the market volatility to remain elevated in the near term, putting pressure on Sensex and Nifty amid a full-blown risk-off regime.
US President Donald Trump set a Monday deadline for Iran, warning that the US can strike Iran’s power plants unless Tehran fully reopens the Strait of Hormuz within 48 hours. In response, Iran warned it would target energy and water infrastructure across the Gulf if the US follows through on its threat.
The rising escalations have pushed oil prices above the key $110 per barrel mark. Rupee, meanwhile, hit fresh lifetime lows, along with persistent FII selling. While India is not directly involved in the war between Iran and the US-Israel, the rising oil prices and other factors may bear an impact on the Indian economy in the short term, as per analysts.
Sensex crashed over 1,900 points, and Nifty fell below the crucial 22,500 level on Monday afternoon, wiping off more than Rs 13 lakh crore from the total market capitalisation of all companies listed on BSE. The bear attack on Dalal Street today mirrors the one in global markets.
“Elevated crude oil prices pose a major macroeconomic challenge for India due to its strong reliance on energy imports. A prolonged rise in oil prices can increase inflationary pressures, expand the current account deficit, and put further pressure on the domestic currency,” said Bajaj Broking Research.
What to expect?
The sharp jump in India Vix, persistent FII selling and rupee’s free fall are all classic markers of a full-blown risk-off regime in an economy that imports 87% of its crude, said Harshal Dasani, Business Head at INVasset PMS.
According to him, the arithmetic at $150 is “devastating”. Chief Economic Advisor (CEA) V Anantha Nageswaran recently said that in case oil prices soar to $130 and sustains in that level, it would shave a full percentage point off India’s GDP growth — dragging it from 7.4% to 6.4%, while pushing CPI inflation to 5.5%.
“At $150–200, those numbers get materially worse,” Dasani said. “Goldman Sachs has already cut India’s FY26 GDP forecast to 6.5% and sees the rupee sliding to 94–95, while the self-reinforcing loop of FPI exits, rupee depreciation, and imported inflation makes any near-term recovery in equities contingent almost entirely on a ceasefire and Hormuz reopening,” he added.
Market volatility likely to remain elevated in near term
Nifty has retraced more than 78.6% of the previous major rally of April 2025 and January 2026 (21744-26373) and has slipped to an 11-month low, forming a lower high and lower low in the short- and medium-term time frame, indicating continuation of the ongoing corrective phase, Bajaj Broking said. “Market volatility is expected to remain elevated in the near term amid uncertain global cues, rising crude oil prices, and escalating geopolitical tensions,” it added.
The recent sharp decline has driven daily oscillators into oversold territory, with the 14-period RSI dropping below 30, Bajaj Broking said, adding that there is, however, still no price confirmation indicating a pause in the ongoing correction. “For signs of stabilization, the index must begin forming a consistent pattern of higher highs and higher lows on the daily chart and secure a close above the immediate resistance level of 23,862, which aligns with the previous week’s high,” it said.
Since the COVID-led decline in 2020, Nifty has consistently held above its previous yearly lows, making this a critical area to monitor in the near term, Bajaj Broking said. “Going forward, geopolitical developments and movements in Brent crude prices are likely to play a decisive role in shaping the direction of the equity markets,” it added.
Sensex has crashed 15% while Nifty has declined around 14% in 2026 so far. The sharp selloff has wiped off nearly Rs 47 lakh crore from the total market capitalisation of all companies listed on BSE this year so far (according to market data till March 20), with the downward trend continuing on Monday.
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