Key Points
- Rupee hits record low at 93.98/USD amid war fears
- Indian stocks tumble, Nifty and Sensex down over 10% since Feb
- Oil prices surge 50%+, raising inflation and growth concerns
- $11 billion foreign outflows intensify market pressure
- Global risk-off sentiment boosts dollar, weakens Asian currencies
MUMBAI: Indian financial markets came under significant pressure on Monday, with the rupee sinking to an all-time low and equities witnessing a sharp sell-off, as escalating conflict in the Middle East intensified concerns over energy supply disruptions and global economic stability.
The Indian rupee weakened to 93.98 per U.S. dollar, breaching its previous record low, as investors reacted to the prolonged Iran conflict that began in late February, according to Reuters.
The currency has now depreciated nearly 3% since the onset of the war, driven largely by a dramatic surge in oil prices—up more than 50%—and ongoing disruptions in gas supplies.
The pressure was not limited to currency markets. Indian equities mirrored the broader regional downturn, with the Nifty 50 dropping 2.6% to 22,512.65 and the Sensex falling 2.46% to 72,696.39 during the session.
Both indices have declined over 10% since the conflict began, reflecting sustained foreign capital outflows and weakening investor sentiment. Market breadth remained weak, with all major sectors closing in the red.
Mid-cap and small-cap stocks were particularly hard hit, each falling nearly 4%, while the volatility index surged to its highest level since mid-2024, signaling heightened uncertainty.
Foreign institutional investors have withdrawn more than $11 billion from Indian equities and bonds in March, marking the largest monthly outflow since October 2024. This exodus has further weighed on the rupee and domestic asset prices.
Analysts attribute the downturn to a broader “risk-off” sentiment dominating global markets. The ongoing conflict has fueled fears of prolonged energy supply constraints, which could stoke inflation and slow economic growth, particularly in energy-importing nations like India.
Despite the sharp depreciation, the rupee has shown relative resilience compared to other Asian currencies. The Korean won and Thai baht have declined by 5% to 6% over the same period, supported in part by intermittent intervention from the Reserve Bank of India aimed at containing volatility.
Meanwhile, bond markets also reflected stress, with the yield on India’s benchmark 10-year government bond rising to 6.847%, indicating selling pressure.
Looking ahead, investor sentiment remains closely tied to geopolitical developments. Markets are particularly focused on a looming U.S. deadline regarding the reopening of the Strait of Hormuz—a critical global oil transit route.
Any escalation could further disrupt energy flows and deepen market instability. For now, uncertainty continues to dominate, with traders bracing for further volatility across currencies, equities, and commodities.
