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The Indian stock market continues reeling under intense selling pressure for the third consecutive session on Friday, March 13, with the benchmarks Sensex and the Nifty 50 falling by 1% each.

The Sensex opened at 75,444 against its previous close of 76,034 and dropped over 900 points, or more than 1%, to the intraday low of 75,121.

The Nifty 50 opened at 23,462 against its previous close of 23,639 and fell over 300 points, or more than 1%, to an intraday low of 23,326.

Both indices are set to extend losses for the third consecutive week. For the current week, the Sensex has shed about 3,800 points, or nearly 5%, while the Nifty 50 has lost more than 1,100 points, or nearly 5%.

Investors have lost ₹16 lakh crore this week as the overall market capitalisation of firms listed on the BSE has dropped to nearly ₹434 lakh crore from nearly ₹450 lakh crore on Friday, March 6.

The US-Israeli conflict with Iran, which started on February 28, continues with tensions escalating.

According to reports, the New Iranian Supreme Leader, Mojtaba Khamenei, has vowed to fight on and keep the Strait of Hormuz shut. Israeli Prime Minister Benjamin Netanyahu also issued a veiled threat to kill Khamenei and defended the military assault.

Iran is hitting ships in the Strait of Hormuz and attacking US bases in the Middle East despite US President Donald Trump's warnings of severe consequences.

Even after some easing, Brent Crude continues to trade above $100 per barrel, posing a major threat to India's macroeconomic outlook.

Oil prices may remain volatile in the near future as long as the war in the Middle East continues, as Tehran has warned it will keep blocking the Strait of Hormuz, through which about 20% of the world's oil usually passes.

A prolonged period of elevated crude oil prices can push up India’s inflation, further weaken the currency, widen the current account deficit, and dampen prospects of monetary easing—eventually weighing on corporate profitability and overall economic growth.

The Indian rupee has been hitting record low levels over the last few sessions. On Friday, the domestic currency fell 17 paise to a new record low of 92.3663 per dollar, according to Bloomberg data. This week, the rupee has declined by more than half a per cent.

While reports suggest that the Reserve Bank of India (RBI) is selling dollars to stem the currency's decline, market experts anticipate the currency to weaken further amid sharp volatility in crude oil prices and aggressive selling of Indian equities by foreign institutional investors (FIIs).

Rupee's weakness can further aggravate foreign capital outflows, since it reduces the returns of foreign investors. Moreover, it also raises inflationary pressure, which can lead to higher interest rates.

So far in March (till the 12th), foreign institutional investors (FIIs) have offloaded Indian stocks worth ₹46,167 crore in the cash segment.

While they have been net sellers since July, the current month’s sell-off is the most intense.

Prior to March, FIIs had sold shares worth more than ₹46,000 crore only in July and August last year. Notably, March is only halfway through.

Market participants note that the US-Iran war may have a significant, albeit slightly longer, impact on energy prices, currency movements, and investor sentiment.

"Historical evidence suggests that conflict-led market corrections are typically short-lived.

However, the confluence of high oil prices, trade uncertainty, and AI-led disruptions warrants some caution in the near term. We expect market sentiment to remain weak, driven by oil-led inflation, if conflicts extend for a longer period," said Kotak Alternate Asset Managers.

In India, brokerage firm Axis Securities noted that a $10 increase in oil prices could widen the country's current account deficit by 0.35–0.5% of GDP. A 10% increase in crude oil prices can raise inflation by about 20 basis points.

Concerns also centre on a global inflation flare-up driven by elevated energy prices. That will be a major blow to market sentiment as it may lead to tighter monetary policy by the US Federal Reserve which can boost US dollar, and trigger more foreign capital outflow from the Indian stock market.

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stories by Nishant Kumar

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.Nishant is a market reporter at Mint, where he holds the official designation of Principal Correspondent – Markets. He has been closely tracking the I...

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