Stocks, rupee become casualty of war amid weak sentiment

Mumbai: India’s equities dropped on Friday, marking their biggest weekly loss in more than a year, amid fears that the conflict in West Asia is escalating and may be prolonged, with higher oil prices and persistent foreign outflows weighing on sentiment. The rupee also weakened during the week as rising oil prices and geopolitical tensions pressured the currency, prompting intervention by the central bank to limit volatility.

The NSE Nifty ended at 24,450.45, down 315.45 points or 1.3%, while the BSE Sensex closed at 78,918.90, falling 1,097 points or 1.4%. Both indices declined 2.9% for the week, their steepest weekly loss since February 2025.

The rupee closed at 91.74 per dollar on Friday, down 14 paise from its previous close of 91.60. The currency had hit a record low of 92.30 on Wednesday. On a weekly basis, the rupee logged its worst decline in a month due to oil-price spikes amid the Gulf conflict.

The Volatility Index (VIX) jumped 11.3% to 19.9, indicating traders anticipate heightened risks in the near term. “Investors are spooked by the erratic news flows from the West Asia and if the conflict is long drawn, some more pain is expected,” said UR Bhat, cofounder and director, Alphaniti. “Unless there is a ceasefire and the warring parties come to the negotiating table, weakness is likely to persist.”

No Signs of Trend Reversal

Bhat said foreign investors continued to pull out funds from India and are not expected to deploy serious money anytime soon.

At home, foreign portfolio investors (FPIs) sold shares worth a net Rs 6,030.4 crore on Friday. Their domestic counterparts bought shares worth Rs 6,971.5 crore. So far in March, global investors sold stocks worth Rs 21,830 crore.

The Reserve Bank of India (RBI) sold as much as $12 billion this week to defend the rupee, according to Reuters. The dollar index increased to 99 on Friday.

“Nationalised banks have been present in the market today as well, but the dollar sales were not as aggressive as on Thursday. They were just trying to smoothen the pace of depreciation,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

The rupee moved in a narrow range amid intervention, and any strength in the currency was met with dollar demand from importers to hedge their positions, said a trader with a state-owned bank. The currency traded between 91.75 and 91.58 during the day.

In equities, technical analysts said the Nifty’s brief rebound on Thursday came as the index approached key support levels and markets appeared oversold.

However, there are no signs of a trend reversal and the bias remains bearish, said Ruchit Jain, head, technical research, Motilal Oswal Financial Services.

“Overseas investors added short positions on index futures and remained sellers in the cash segment,” said Jain. “This combination indicates that price-wise correction is expected to follow.”

Among sectors, the Bank Nifty dropped 2.2% on Friday while the Nifty private bank and PSU Bank indices shed 2.3% and 2% respectively. Nifty Realty fell 2.1% and Nifty Auto slipped 1%.

Broader markets were relatively resilient. The Nifty Mid-cap 150 index declined 0.7% and the Small-cap 250 index slid 0.3%. In the past week, the mid-cap and small-cap indices fell around 3% each.

Bhat said that there had been news of a narrow window of negotiation on Thursday that relieved investors and led to a rebound but further aggravations will spark more declines.

“In the near term, 24,300 is the immediate support followed by 24,100-24,000,” said Jain. “On the higher side, 24,900 is the hurdle and the benchmark must cross this threshold for a clear trend reversal.”

Elsewhere in Asia, Hong Kong rose 1.7% while Japan and China advanced 0.6% and 0.4%, respectively. South Korea ended marginally higher. However, Taiwan declined 0.2%.

In the bond market, the 10-year government security yield closed at 6.69%, five basis points above its previous close, reflecting the risk-off sentiment due to the West Asia conflict. Central bank intervention in the government bond market was also less aggressive than on Thursday, traders said.

The ‘others’ category, which includes pension funds, insurers, along with the central bank, bought Rs 10,770 crore on Friday, compared with Rs 17,254 crore on Thursday and Rs 20,285 crore on Wednesday. The ‘others’ category bought Rs 8,602 crore and Rs 7,484 crore in the previous week.