Indian Equity Markets Endure Worst Week Since June 2022

The week ending March 13 proved disastrous for the Indian equity markets, as the benchmark Nifty 50 experienced its largest weekly decline since June 2022. This downturn mirrored weakness in global peers amid escalating tensions between the US, Israel, and Iran, resulting in elevated oil prices and increased fears over corporate earnings and economic growth.

The turmoil led to an elevated VIX, pressure on the rupee, and sustained FII outflows. Selling pressure was observed across sectors, while overall market breadth remained fragile, as tighter gas availability began to affect daily activity and higher crude prices reignited fiscal and inflation concerns.

Market Outlook

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The market is expected to remain dominated by bears amid the ongoing US-Iran conflict and rising oil prices, with market stability unlikely until Middle East tensions ease. Market attention will focus on the FOMC meeting outcome and interest rate decisions of other central banks—ECB, BoJ, and BoE—scheduled for the week ahead, starting March 16.

Market Performance

During the week, the Nifty 50 crashed 1,299 points (5.31 percent) to close at 23,151, while the BSE Sensex plunged 4,355 points (5.52 percent) to 74,564. The Nifty Midcap and Smallcap 100 indices declined 4.6 percent and 3.66 percent, respectively.

Key Factors to Watch

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

1. Strait of Hormuz-led Oil Crisis: The ongoing US-Iran standoff is likely to continue, with the US defense forces targeting Iranian military sites and warnings from Donald Trump that Iranian oil facilities could be targeted if Tehran continues to disrupt shipping.
2. Brent Crude Oil Prices: Prices closed the week above $100 a barrel at $103.81, up 11.77 percent, causing concern for oil importing countries like India.
3. FOMC Meet: The outcome of the FOMC meeting will be closely watched, particularly in relation to interest rate decisions and their impact on the market.
4. Domestic Institutions and Retail Investors: Buying support from domestic institutions and cautious retail investors will be crucial for a sustained market recovery.
5. Geopolitical Tensions: Clear signs of geopolitical de-escalation, stabilization in crude prices, and improved clarity on LPG availability and sector-specific demand will be essential for a market recovery.