Indian benchmark indices closed sharply lower on Wednesday, weighed down by heavy selling in financials, auto stocks and select index heavyweights, as the ongoing U.S.-Iran conflict kept risk-off sentiment elevated. Concerns over rising inflation due to potential energy supply disruptions and possible fuel rationing prompted investors to book profits, while continued foreign institutional investor (FII) outflows further added to the pressure on the markets.

The BSE Sensex closed 1,342 points, or 1.72%, lower at 76,863.71, after hitting an intraday low of 76,759.26. The Nifty 50 also declined 394.75 points, or 1.63%, to settle at 23,866.85. The broader market showed a mixed trend, with the Nifty MidCap index declining 1.25%, while the Nifty SmallCap index edged down 0.36%.

Market breadth remained negative on the BSE, reflecting broad-based selling pressure across the market. Out of 4,414 stocks traded, 2,381 declined, while 1,881 advanced and 152 remained unchanged.

The weakness was also visible in the number of stocks hitting fresh lows. About 200 stocks touched their 52-week lows, compared with 74 stocks that scaled their 52-week highs, indicating a risk-off sentiment among investors.

The India Volatility Index surged nearly 11%, highlighting the fragile nature of current market sentiment and the sensitivity of investors to rapidly evolving geopolitical headlines.

Financials, autos drag markets

On the BSE Sensex pack, 28 out of 30 stocks ended in red zone, barring NTPC and Sun Pharma. Bajaj Finance fell 5%, emerging as the worst performer among Sensex constituents. This was followed by Axis Bank and Bajaj Finserv, which declined around 4%.

Auto stocks also reeled under selling pressure, with Mahindra & Mahindra falling 3.8% and Maruti Suzuki slipping 2.6%.

Other major laggards included Bharti Airtel, Trent, Asian Paints, Kotak Mahindra Bank, and State Bank of India, which all ended between 2% and 2.5% lower.

Technology stocks also remained weak. Tata Consultancy Services fell nearly 2%, while Infosys declined about 1.5%.

On the other hand, NTPC rose 0.7%, while Sun Pharmaceutical Industries gained about 0.6%. ITC and Power Grid Corporation of India ended largely flat.

Sectoral indices also reflected the broad-based weakness. The Nifty Auto index fell over 3%, emerging as the worst-performing sector, while the Nifty Private Bank index dropped around 2.4%. The Nifty Financial Services index declined nearly 2%, and the Nifty IT index slipped about 1.2%.

In contrast, defensive sectors offered some support. The Nifty Pharma index ended 0.4% higher, while the Nifty Oil & Gas index managed modest gains of around 0.2%.

Analysts expect markets to remain range-bound

Ponmudi R, CEO of Enrich Money, said investors are currently prioritising capital preservation amid heightened geopolitical uncertainty, and markets are therefore likely to remain range-bound with a bearish bias in the near term until clearer signals emerge on the Middle East conflict and its impact on global energy supply chains.

Rahul Singh, Chief Investment Officer – Equities at Tata Asset Management, noted that recent geopolitical developments in the Middle East have increased the risk premium for Indian equities, primarily due to concerns over rising crude oil prices and their potential impact on the rupee.

However, he added that valuations have become relatively more reasonable, with the Nifty trading at around 20 times earnings. While near-term sentiment may remain sensitive to global developments, sectors such as consumer and pharmaceuticals could remain relatively insulated, while metals and energy companies may benefit from higher commodity prices.

Meanwhile, Vinod Nair, Head of Research at Geojit Investments, said concerns over potential energy supply disruptions and fuel rationing have heightened inflation worries, prompting investors to book profits, while continued foreign institutional investor (FII) outflows added further pressure on the markets.

Nifty forms bearish pattern

From a technical perspective, Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, said the Nifty faced strong resistance around the 24,300–24,310 zone and eventually closed lower at 23,867, forming a sizeable bearish candle on the daily chart, indicating strong selling pressure at higher levels. Immediate support for the index is placed in the 23,750–23,700 zone, and a sustained break below this level could push the Nifty towards 23,500 and 23,300 in the short term. On the upside, the 23,950–24,000 zone is likely to act as a key resistance.

Similarly, the Bank Nifty faced stiff resistance near the 57,000–57,100 zone and ended the session at 55,736, down 2.13%, erasing the previous session’s gains. Shah said the index has immediate support at 55,400–55,300, while a breakdown below this level could extend the decline towards 54,900 and 54,500. On the upside, the 56,100–56,200 range is expected to act as a strong resistance in the near term.

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