Indian equities retreated from last week’s sharp rally after peace talks between Washington and Tehran collapsed over the weekend and the US Navy prepared to block ships to and from Iran via the Strait of Hormuz, denting investor sentiment and pushing crude oil prices back above $100 a barrel.
After tumbling as much as 2.2 per cent, or 1,682 points, in intraday trade, the Sensex recovered a significant portion of its losses to settle at 76,848, down 703 points, or 0.9 per cent. The Nifty 50 ended at 23,843, also lower by 0.9 per cent, or 208 points. The total market capitalisation of BSE-listed firms declined by ₹2 trillion to ₹449 trillion, while India Vix, the volatility gauge, jumped 8.75 per cent to 20.5.
The rupee, too, declined 0.7 per cent. The Indian unit fell to 93.44 per dollar before settling at 93.38 against 92.73 in the previous session. So far in April, the rupee has appreciated 1.54 per cent.
Government bond yields, on the other hand, inched up, tracking the rise in crude oil and renewed concerns over imported inflation. The benchmark 10-year bond yield edged up to 6.97 per cent before settling at 6.94 per cent, compared with its previous close of 6.91 per cent.
In response, Iran said it would target all ports in and close to the Persian Gulf if its own shipping hubs are threatened.
Rising oil prices tend to weigh on import-dependent economies such as India.
Foreign portfolio investors (FPIs), who had briefly turned net buyers of equities on Friday, resumed their selling, pulling out nearly ₹2,000 crore on Monday. Domestic institutions, however, injected ₹2,400 crore into the markets.
Monday’s decline comes after domestic equities logged their strongest weekly gains in over five years in the previous week, aided by optimism around a tentative ceasefire between the US and Iran, which had temporarily eased supply concerns.
“The markets continue to draw limited support from last week’s ceasefire framework, which remains intact for now, encouraging selective buying and a buy-on-dips approach despite the initial negative reaction to the breakdown of talks and the US naval blockade,” said Vinod Nair, head of research at Geojit Investments.
Investors are now expected to closely track the ongoing fourth-quarter earnings season. “While the immediate impact on Q4FY26 earnings is likely to be manageable, prolonged tensions in West Asia could have more meaningful implications for Q1FY27. Volatility is expected to remain elevated, with the markets closely tracking geopolitical developments alongside earnings quality and management commentary,” Nair added.
Market participants said the sharp recovery from the day’s lows reflects expectations that diplomatic efforts could resume. “The war has put the global economy under significant stress, and there will be pressure on all sides to return to the negotiating table,” said Chokkalingam G, founder of Equinomics.
Market breadth was weak, with 2,640 stocks declining against 1,754 advancing. All but four Sensex constituents ended lower. HDFC Bank, down 2.02 per cent, was the biggest drag on the index, followed by Reliance Industries, which fell 2.6 per cent.
Losses in the broader market were relatively contained, with the Nifty Midcap 100 and Nifty Smallcap 100 indices declining 0.6 per cent and 0.5 per cent, respectively. All sectoral indices on the NSE ended in the red, led by the Nifty Auto index, which dropped 2.1 per cent amid concerns over proposed policy changes favouring electric vehicles in Delhi. Broader market small and midcap indices fell about half a per cent each.