Indian equities have witnessed sharp selling pressure since the U.S.-Israel strikes on Iran on February 26, as the situation escalated from geopolitical tensions into a broader macroeconomic shock. Brent crude surged above $115 per barrel, rising nearly 55% in March, amid partial disruption in the Strait of Hormuz, which accounts for around 20% of global oil flows. Bond yields also moved higher as markets began pricing in a prolonged phase of elevated inflation and tighter financial conditions.

Globally, central banks have turned more cautious, adopting a wait-and-watch approach, with the possibility of rate hikes to counter inflationary pressures. For India, the oil shock has intensified concerns around inflation, the current account deficit, and economic growth.

Against this backdrop, the RBI, in its April 8 policy, maintained status quo with a neutral stance and revised its FY27 growth projection to 6.9%. Meanwhile, the rupee weakened to a record low near 95 against the U.S. dollar, and India’s 10-year bond yield rose to around 7%.

FIIs pull out ₹1.62 lakh crore from equity market

FII outflows have further exacerbated market pressure, with foreign investors pulling out ₹1.62 lakh crore since the onset of the conflict and ₹2.1 lakh crore in CY26 so far. However, the selling is not driven by geopolitical tensions alone; it reflects a combination of rising oil prices, currency weakness, elevated bond yields, higher hedging costs, stretched valuations, and weak earnings visibility in key sectors such as private banks, IT, FMCG, and pharmaceuticals.

In contrast, domestic institutional investors (DIIs) have emerged as strong counterbalances, absorbing much of the selling pressure. DIIs have invested a record ₹1.78 lakh crore in equities over the past six weeks, including ₹1.43 lakh crore in March alone. Their sustained participation has provided a crucial cushion to the markets, preventing sharper declines despite persistent foreign outflows.

Equities emerge as the worst performers

Indian equities have borne the brunt of the risk-off sentiment, with the BSE Sensex declining 6.75% and the Nifty 50 falling 6.8% since the onset of the conflict. At their worst, both indices saw peak drawdowns of nearly 13%, slipping to 52-week lows of 71,545.81 and 22,182.55, respectively, in intraday trade on April 2.

The broader market also registered losses, with the Nifty Midcap 100 slipping 4.71% and the Nifty Smallcap 100 falling 3.22% since February 26.

The sell-off has eroded nearly ₹24 lakh crore in investor wealth over the past six weeks, with the total market capitalisation of BSE-listed companies falling to ₹444.35 lakh crore from ₹468.26 lakh crore on February 26. At the peak of the turmoil on March 30, losses had ballooned to a staggering ₹57 lakh crore.

Bond yields spike amid inflation concerns

Beyond equities, stress signals are visible across debt markets. Bond yields hardened, with the India 10-year G-sec yield rising 27 basis points to 6.97% amid inflation concerns and tighter financial conditions.

India’s bond market witnessed sharp volatility in the second half of FY26 amid global uncertainties, rising crude oil prices, inflation concerns, and currency weakness. The 10-year yield remained volatile through FY26—starting at around 6.40% in April 2025, moving largely range-bound in the initial months, and then inching higher in the second half. Yields rose to around 6.65% in January 2026, 6.70% in February, and 6.75% by March.

Rupee hits multiple record lows

The Indian rupee witnessed sharp volatility, hitting multiple all-time lows against the U.S. dollar amid concerns that escalating tensions in West Asia and surging crude oil prices could further strain the country’s import bill.

The rupee hit a record low of ₹95.22 against the U.S. dollar in intraday trade on March 30, amid a spike in crude oil prices to around $115 per barrel. Overall, the currency declined nearly 1.8% during the conflict period, recovering from a peak fall of around 5%, aided by RBI intervention. The central bank also tightened norms on banks’ net open positions (NOP) in the foreign exchange market, capping them at $100 million.

Gold, silver lose some shine

Contrary to their typical safe-haven appeal, bullion prices softened during the period, with gold declining 3.4% and silver falling 4.5%, indicating profit booking and a shift in investor positioning despite elevated geopolitical tensions.

Gold prices fell from ₹1,59,350 per 10 grams as of February 26, 2026, to ₹1,53,930 by April 9. Silver followed a similar trajectory, slipping from ₹2,66,994 per kg to ₹2,55,000 per kg. Going ahead, bullion prices are expected to remain volatile, with direction dependent on geopolitical developments and macroeconomic cues.

Brent crude surges on supply concerns

The sharp spike in Brent crude prices emerged as the key trigger behind the weak performance across asset classes. Prices surged up to 50% in March, driven by fears of supply disruptions, particularly around key transit routes. Brent briefly touched $120 per barrel, raising concerns over inflation, currency pressure, and weaker equity sentiment.

However, following the announcement of a temporary U.S.-Iran ceasefire this week, Brent crude corrected sharply from the $100 zone as risk sentiment improved across global markets.

Cryptos show relative resilience

Across asset classes, risk appetite resurfaced selectively in digital assets. Bitcoin and Ethereum gained between 5-8% over the past six weeks, supported by value buying after recent corrections.

Bitcoin rose 5.7% to $71,284, while Ethereum gained 7.9% to $2,187, aided by continued ecosystem development and growing institutional interest.

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