Indian equities endured a punishing, volatile start to the week. While the Sensex initially plummeted more than 2,400 points and Nifty 50 broke below the 23,800 support level on Monday, a late tug-of-war saw the Nifty fight back to reclaim the psychologically important 24,000 mark.
This bruising session comes as the geopolitical landscape undergoes a dramatic shift. With the West Asia conflict entering a volatile new phase, crude oil prices have surged past $100 a barrel.
As the heat rises, Mint dives into six burning questions facing Dalal Street.
1. Brent crude oil has surged past $100 per barrel and the rupee is at all-time low, falling below 92 per dollar. Does this signal a structural risk for equities?
The domestic economy is essentially tethered to the volatility of global markets as India relies on imports for nearly 80% of its crude oil. When oil prices climb, it sets off a domino effect across major economic indicators—stoking inflation, hiking interest rates, devaluing the rupee, and widening the trade gap.
India's macroeconomic sensitivity to oil prices is substantial. An Axis Securities report noted that every $1 increase in crude oil prices raises India’s annual import bill by roughly $1.5-2 billion. A $10 rise in oil prices could widen the current account deficit by about 0.35-0.5% of GDP, while a 10% increase in crude prices could raise inflation by nearly 20 basis points, the report noted. These linkages make crude oil one of the most closely tracked variables among Indian investors.
Brent crude’s 40% surge since the West Asia conflict began has rattled markets, forcing investors to confront an stark reality of expensive crude oil. However, Ajitabh Bharti, co-founder and executive director of CapitalXB, a fintech firm, remains sanguine. “I don't see this as a structural risk for equities just yet. It feels more like a sharp cyclical shock, but the equity market’s pricing mechanisms are built to absorb such fluctuations in the short term," he said.
2. While the Nifty closed at 24,028, the intraday slip to 23,697 exposed the 24,000 floor as fragile. Does this make a deeper correction toward 22,800 more likely if the West Asia conflict escalates?
Selling pressure spiked as the West Asia conflict entered a second week without reprieve, though a late-session recovery helped indices claw back some ground to end 1.7% lower. Despite the partial rebound, the mood remains decidedly bearish as investors navigate the twin headwinds of geopolitical volatility and surging energy prices.
“From a technical perspective, immediate resistance for the index is placed in the 24,200–24,250 zone, while strong support is observed around 23,900–23,950. The Relative Strength Index (RSI) stands at 28.89, indicating an oversold market condition and suggesting the possibility of a short-term rebound,” said Hitesh Tailor, technical research analyst at Choice Broking.
3. The India VIX has surged over 70% to touch a high of 24.5 since the war broke out. Historically, does a VIX spike above 25 signal that most of the selling pressure is exhausted, or is there more room for fear-driven selling?
Volatility surged alongside the decline, reflecting rising investor anxiety. India VIX, the fear gauge, touched a high of 24.5 and closed at 23.59, marking an increase of more than 70% within a week as geopolitical risks intensified.
VIX spiking to around 25 indicates fear in the market and probability of further a market decline. “VIX behaviour can be different during different times depending on the triggers for the fear. This time, it appears that the market has overreacted a bit. This can reverse when crude declines in the coming days,” said V K Vijayakumar, chief investment strategist, Geojit Investments Limited.
Hariprasad K, a Sebi-registered research analyst and founder of Livelong Wealth, said that such a sharp rise in volatility signals elevated uncertainty and typically results in inflated options premiums. “In such conditions, derivatives traders tend to adopt a cautious approach, as any sudden de-escalation in geopolitical tensions could quickly push volatility lower and compress option premiums sharply.”
4. Foreign portfolio investors have sold in early March while domestic institutional investors (DIIs) continue to buy, cushioning the fall. How long can domestic SIP inflows sustain this ‘buy the dip’ strategy?
After turning net buyers in February, FPIs have hit the exit button with urgency in early March, offloading Indian equities as global risk appetite evaporates. They have sold shares worth more than ₹20,000 crore since the Iran war began. However, the market has not been left entirely defenceless, with domestic institutional investors stepping in to absorb a significant portion of this foreign liquidity.
Since the Indian economy is strong and has the potential to withstand the ongoing crisis, people are likely to continue investing, Vijayakumar added. “Valuations are now fair for largecaps. HNIs will buy and long-term investors will continue to invest through SIPs.” He cautioned, however, that wars can have completely unexpected consequences, so investors should wait and watch.
5. For high-beta sectors such as paints, aviation, and oil marketing companies, is the current 3-5% correction enough to bake in the margin contraction, or are we looking at a significant downgrade cycle in Q4 FY26 earnings?
The surge in oil prices is wreaking havoc on energy-linked sectors. Oil marketing companies are under pressure as elevated crude threatens to squeeze refining and marketing margins. Aviation stocks have also come under strain since aviation turbine fuel accounts for nearly 45% of airlines’ operating costs. Crude-dependent industries such as paints and chemicals also remain vulnerable as rising input costs risk compressing margins that were already under pressure.
Narender Singh, smallcase manager and founder of Growth Investing, cautioned that if crude prices remained elevated, the impact could spill into future quarters. “Sustained high oil prices will likely hurt margins and earnings in Q4FY26 and FY27, forcing the market to correct these stocks further,” he said.
Bharti of CapitalXB, said he expects a deeper derating of 15-25% as earnings downgrades begin to surface from the April quarter onwards. “The current 3-5% correction only factors in about ₹2,000 crore of aggregate impact from higher oil prices, while the real hit could be closer to ₹8,000–10,000 crore,” he said. Investors may need to wait for nearly 20% drawdowns before considering normalisation opportunities in these sectors, he added.
6. While pharma and healthcare have remained resilient thus far, can they withstand a broader global “risk-off” liquidation across emerging markets? Beyond these defensives, which sectors are worth watching?
Traditionally defensive sectors such as pharmaceuticals and healthcare have remained relatively resilient amid the broader market sell-off, declining only about 0.1–0.2% compared with the Nifty 50’s 1.7% fall on Monday.
Analysts attribute this stability to supportive global fundamentals, including stable generic drug prices in the US and strong growth in contract development and manufacturing organisations (CDMOs).
CapitalXB’s Bharti noted that Indian pharma continues to benefit from improved regulatory compliance and a steady pipeline of US FDA approvals for new generic drugs. Hospitals, meanwhile, remain structurally insulated due to domestic demand, with average revenue per occupied bed (ARPOB) growing at around 12%.
However, Bharti cautioned that even defensive sectors may not remain immune if global risk aversion intensifies. A sharp wave of foreign outflows from emerging markets could drag pharma and healthcare stocks lower by 10-15%, particularly if FII outflows cross $15 billion in a single month, he added.