Oil shock continues to rattle market: Sensex sinks 970 pts as Middle East war propels crude above $100; Nifty slips below 23,600

Indian equity markets extended losses on Thursday after tumbling nearly 1.7% in the previous session, as the escalating Middle East conflict involving the United States, Israel, and Iran entered its 13th day. Brent crude rebounded toward the $100 per barrel mark, dampening investor risk appetite.

In early trade, the BSE Sensex dropped as much as 971 points, or 1.26%, to 75,893, dragged down by broad-based selling across sectors. In a similar trend, the Nifty 50 declined 271.70 points, or 1.14%, to 23,594.10.

The broader market saw an even sharper correction, with the Nifty Midcap 100 and Nifty Smallcap 100 indices tumbling 1.70% and 1.74%, respectively.

Meanwhile, the India VIX, often referred to as the market’s fear gauge, jumped over 6% to 22.34 shortly after the opening bell, signalling heightened investor anxiety and expectations of increased near-term volatility.

In overnight trade, Brent crude rallied about 9%, crossing the $100-per-barrel mark again after Iran reportedly targeted energy infrastructure and shipping lanes across the Middle East.

“External headwinds have pushed the market into a weak zone. With the war continuing to rage with no signs of let-up and Brent crude again bouncing back to $100 levels, the weakness is likely to persist. Even though DIIs are continuously buying in the market, their support has not helped recovery as FIIs remain sustained sellers and show no signs of reversing their strategy in this uncertain global environment,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

27 out of 30 Sensex stocks in red

On the BSE Sensex pack, 27 out of 30 stocks traded in negative territory, barring Tech Mahindra, Coal India, and Oil and Natural Gas Corporation, which were marginally higher.

Aviation major IndiGo was among the top laggards, declining nearly 3%, followed by Mahindra & Mahindra, Trent, and Tata Steel, each falling over 2%. Financial stocks also came under pressure, with ICICI Bank, Axis Bank, and State Bank of India trading lower.

Other notable losers included Larsen & Toubro, Titan Company, Maruti Suzuki India, UltraTech Cement, and Bajaj Finance.

Market breadth remained decisively negative, with 2,152 stocks declining against 695 advances out of 3,004 stocks traded on the BSE. Meanwhile, 176 stocks touched their 52-week lows, compared with just 24 hitting fresh highs, indicating weakness in the broader market.

Nifty Auto, Realty index top laggards

On the sectoral front, the Nifty Auto index was the worst performer, dropping about 2.5%. The Nifty Realty index declined more than 2%, while the Nifty Consumer Durables index fell around 2.1%, indicating selling pressure in discretionary consumption stocks.

Metal and media stocks were also under pressure, with the Nifty Metal and Nifty Media indices declining about 1.8% each.

Financial stocks, which carry significant weight in the benchmark index, traded lower as well. The Nifty Private Bank index fell around 1.3%, while the Nifty PSU Bank index slipped 1.65%. The Nifty Financial Services index also declined about 1.35%.

Defensive sectors showed relatively limited declines. The Nifty IT index fell 0.61%, while the Nifty Pharma and Nifty FMCG indices were down 0.79% and 1.31%, respectively. Meanwhile, the Nifty Oil & Gas index was marginally lower by 0.24%, making it one of the relatively resilient sectors in early trade.

Market outlook

Vijayakumar added that markets can often be frustrating during periods of heightened geopolitical uncertainty.

“History shows that markets tend to rebound strongly once conflicts subside. Investors should therefore remain invested and continue with systematic investment plans. Long-term investors can use market weakness to gradually accumulate high-quality blue-chip stocks across sectors. This is also a good time to rebalance portfolios in favour of stronger companies,” he said.

Meanwhile, Ponmudi R, CEO of Enrich Money, said global trade uncertainties have resurfaced after the United States launched a fresh investigation into the manufacturing and industrial practices of 16 economies, including India, China, Japan, and the European Union, citing concerns over “structural excess capacity” that could distort global trade flows.

He added that reports of a potential release of about 400 million barrels of oil from strategic reserves through a coordinated initiative by the International Energy Agency to offset supply disruptions from the Middle East conflict offered some near-term relief to global markets. However, crude prices continued to trend higher as disruptions to tanker movement through the Strait of Hormuz kept supply risks elevated and investor sentiment cautious.

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