Market in turmoil: Nifty falls to lowest since May as West Asia war sparks global fear

Benchmark India stock indices tumbled almost 3% at the open on Monday, with investors rushing to cut risk and reassess the global fallout as the war in West Asia intensified, stoking fresh concerns over prolonged disruptions to crude oil shipments through the Strait of Hormuz, one of the world’s most critical energy transit routes.

As crude oil prices surged past $100 a barrel, the Nifty 50 logged its biggest single-day fall since Budget Day on 1 February. By the end of the day, the market capitalization of companies listed on the BSE was eroded by ₹8.47 trillion.

The Asian markets were routed, too. Japan’s Nikkei 225 slumped 5.2%, Hong Kong’s Hang Seng dropped 1.49%, the Taiwan Weighted tanked 4.43%, and South Korea’s Kospi was 5.96% down.

The Indian indices ended off their lows. The Nifty 50 was 1.73% lower at 24,028.05, its lowest level since 9 May last year. The S&P BSE Sensex fell 1.71% to 77,566.16, the lowest since 16 April.

Technical analysts said there was strong selling pressure. The index formed a strong bearish candle with a lower high-lower low pattern, indicating sustained selling pressure as Brent crude surged, Rajesh Palviya, SVP research (head technical & derivatives) at Axis Securities, said in a report.

“A sustained break below 24,000 could trigger a deeper correction. On the upside, a decisive move above the bearish gap zone of 25,000-25,141, formed on 2 March 2025, is essential for bulls to regain control,” he said.

According to Shrikant Chouhan, head of equity research at Kotak Securities, “The current market texture is weak but oversold.”

Support zone

For day traders, 24,000-23,900 would act as a key support zone for the Nifty 50, while 77,500-77,200 would be the support range for the Sensex. If these levels hold, the Nifty 50 could move up to 24,150–24,300 and the Sensex to 78,000-78,200, he said.

“On the flip side, below 23,900/77,200, the selling pressure is likely to accelerate. If the market falls below this level, it could retest 23,700/76,500. Further downside may also continue, potentially dragging the index to 23,500/76,000,” Chouhan said.

Among sectoral indices, the Nifty Auto and Nifty PSU Bank fell the most, each declining by about 4% on Monday. The broader market fell in tandem with the benchmark indices early on in the session. But the Nifty Midcap 100 and the Nifty Smallcap 250 settled about 1.97% and 2.33% lower, respectively.

Among the biggest laggards on the Nifty 50 were Tata Motors Passenger Vehicles (-5.27%), UltraTech Cement (-5.25%) and Maruti Suzuki India (-4.67%). Reliance Industries, which fell over 2% intraday, recouped its losses and closed almost 1% higher, driving some bit of recovery in the headline indices.

Nikunj Doshi, chief investment officer of portfolio management services at Bay Capital, anticipates a wave of earnings downgrades as a result of this crisis because businesses will find it difficult to pass on cost escalations in raw materials and logistics to customers.

“The extent of earnings impact will, however, be known only after some clarity emerges on the price stabilization in commodity prices. We don’t know as of now where all the commodities prices will settle,” Doshi said.

Domestic demand

Businesses that are driven by domestic demand will be better off in the current scenario. Consumption and defence-related sectors look better-placed at present, he added. Doshi said it will take a few weeks, or perhaps months, even after the war is over, for things to get normal.

The spike in uncertainty was reflected in the India VIX, the volatility index that’s often referred to as the market’s fear gauge, which surged about 22% before ending 17.5% higher, signalling a sharp jump in investor anxiety. Such moves typically indicate heightened nervousness in the market, with traders bracing for more volatility as geopolitical developments unfold.

Foreign institutional investors, who were net buyers of Indian equities worth ₹17,147.25 crore in February, quickly flipped to the sell side in March, offloading shares worth ₹15,532.32 crore so far this month.

Domestic institutional investors stepped in as steady buyers. After buying equities worth ₹38,423.11 crore in February, they continued to cushion the market in March as well, buying shares worth ₹32,786.92 crore so far.

According to BSE provisional data, FIIs net sold Indian equities worth ₹6,346 crore on Monday and DIIs bought shares worth ₹9,014 crore.

Oil prices surged, with Brent crude jumping to $116.83 per barrel intraday — its highest level since 4 July 2022. Crude oil above the $100 a barrel mark indicates that the severe oil supply disruption could continue for a longer period, ICICI Securities said in a report dated 6 March.

“In such an environment, NIFTY 50 could potentially drop by ~10% from the pre-conflict-day level of 25,178; and NIFTY 50’s P/E ratio could drop to ~18x which is closer to the lowest levels in the post covid era,” ICICI Securities said.

Consequently, the brokerage said the earnings yield could rise to about 5.6%—the highest in the post-Covid period—while the gap between bond yields and earnings yield could narrow to about 100 basis points. This would make equities relatively more attractive than bonds, assuming bond yields do not spike.