Rising geopolitical tension in West Asia dragged domestic equity benchmarks to their sharpest weekly fall in nearly four years. Both the benchmark indices, the Sensex and the Nifty closed lower on four out of five sessions this week, except on March 10. Weak global cues, a falling rupee, continued selling by foreign portfolio investors (FPIs), and rising crude oil prices weighed heavily on investor sentiment.
During the week, the BSE Sensex declined 4,354.98 points, or 5.51 per cent, to close at 74,563.92. The Nifty50 lost 1,299.35 points, or 5.31 per cent, to close at 23,151.10.
All sectoral indices finished the week in the red. Auto and banking stocks saw the deepest drawdowns. The Nifty Auto index fell around 10.60 per cent, while the Nifty PSU Bank index sank 7.20 per cent. The Nifty Private Bank index declined 7 per cent, and the Nifty Metal index slipped 6 per cent.
The trajectory of the market in the coming week, from March 16-20, will depend on a few key macroeconomic developments. Here are the major triggers to watch out for.
US-Israel-Iran War Latest Update
The US-Israel-Iran war entered its 16th day on Sunday, with tensions continuing to escalate across the region.
In the latest development, US President Donald Trump threatened further strikes on Iran’s Kharg Island. “We may hit it a few more times just for fun,” he told NBC News on Saturday. Iranian Foreign Minister Abbas Araghchi, in response, vowed retaliation if Kharg Island is attacked again.
The latest threats have added more fuel to the fire, and will keep market participants on their toes when trading resumes on Monday, March 16.
Crude Oil Price
The ongoing US-Israel-Iran war has spiked crude oil prices by more than 40 per cent, and weakened rupee against the dollar, rattling equity markets in India and across the globe.
On March 14, the US oil benchmark West Texas Intermediate (WTI) crude oil futures last quoted at $98.71 per barrel, and the Brent crude oil futures stood at $103.14 per barrel.
Before the US and Israel launched their joint operation against Iran on February 28, the WTI quoted at $67.02 a barrel, and the Brent quoted at $72.48 a barrel. Any further rise in crude oil prices could negatively impact Indian equities as India relies heavily on imported oil.
US Fed Interest Rate Decision
Higher oil price often creates a ripple effect across the world economy as it raises transportation and logistics costs, which eventually feed into broader inflation. When inflation rises significantly, central banks across the world often respond by tightening monetary policy through higher interest rates, which can slow economic growth and raise concerns about a broader global economic slowdown.
Amid this backdrop, the US Federal Reserve’s rate-setting panel Federal Open Market Committee (FOMC) will be hold a two-day meeting on March 17-18 to decide on what to do with interest rates – whether to increase interest rates to manage higher inflation, keep them unchanged and wait and watch, or begin easing monetary policy.
FPI Selling
Since the US-Israel-Iran war began, foreign portfolio investors (FPIs) have significantly reduced their exposure to Indian equities, remaining net sellers in all nine trading sessions that followed.
Data from the National Securities Depository (NSDL) showed that FPIs offloaded equities worth Rs 66,051 crore by March 13. In February, however, they had purchased equities worth Rs 22,615 crore, while selling Rs 35,962 crore.
