The ongoing conflict in West Asia kept the Indian market and rupee under pressure on Wednesday. The rupee slumped to a record low closing of 92.15. The Sensex fell 1.40% to close below 80,000, broadly in line with other Asian markets, amid a surge in crude oil prices (which touched a high of $84.5 per barrel) driven by the ongoing West Asia conflict.
In the past three sessions, investor wealth has eroded by Rs 21.31 lakh crore, including nearly Rs 10 lakh crore on Wednesday alone.
Despite domestic institutional investors (DIIs) pumping in Rs 32,955 crore over the three sessions, the benchmarks have declined by up to 4%. Foreign portfolio investors (FPIs) sold shares worth Rs 17,209 crore ($1.9 billion) during the same period.
The rupee close at a new record low of 92.15, down 67 paise or 0.74% from the previous close, after hitting an intraday all-time low of 92.30. Currency traders said the Reserve Bank of India (RBI) stepped in to curb excess volatility, thereby capping further losses.
Currency Crisis
So far in FY26, the rupee has depreciated 7.82% — its steepest fall in three years — making it the worst-performing major currency. Over the past month alone, it has weakened by nearly 2%.
“The rupee’s weakening trajectory stems directly from its correlation with rising crude oil prices. If oil prices continue to rise, it will lead to further depreciation,” said Ritesh Bhansali, Deputy CEO, Mecklai Financial Services.
Bhansali added that though the RBI is intervening, it is not aggressive to that extent. He also does not see much point in depleting reserves at a time when overall sentiment remains negative.
Guara Sengupta, chief economist at IDFC FIRST Bank, attributed the RBI’s calibrated intervention to liquidity management. “When they sell dollars in the FX market, they buy G-secs to manage liquidity. They are not trying to change the direction of the currency but to moderate the pace.”
According to Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, the key variable to watch is the status of the Strait of Hormuz, a critical artery for global oil shipments. “The longer disruptions persist, the higher oil prices are likely to move, which in turn could push USD/INR further upward.”
In the near term, economists expect the rupee to trade in a broad range of 91–93.
On the equity front, the Sensex plunged 1,122.66 points, or 1.40%, to close at an 11-month low of 79,116.19. The Nifty lost 385.20 points, or 1.55%, to end at 24,480.50 — its lowest closing level in six months.
During the day, the Sensex and Nifty had fallen as much as 1,795.65 points (2.24%) and 560.30 points (2.25%), respectively.
On Wednesday, FPIs sold shares worth Rs 8,752.65 crore, while DIIs bought shares worth Rs 12,068.17 crore, as per provisional BSE data.
Over the past three sessions, the Sensex has declined 3,132.42 points, or 3.81%, while the Nifty has fallen 1,016.05 points, or 3.99%. The broader BSE Midcap and BSE Smallcap indices have tumbled 4.92% and 5.15%, respectively, over the three sessions, including Wednesday’s decline of 2.36% and 2.31%.
Indian equities continue to react more sharply to negative developments than positive ones, raising concerns that structural issues may be surfacing, noted equity strategists Ridham Desai and Nayant Parekh of Morgan Stanley in a report.
However, they view the current correction as more of an adverse market plumbing issue and an opportunity to accumulate high-quality businesses at reasonable valuations, despite near-term volatility.
Valuation Perspectives
Interestingly, the report retained its December 2026 Sensex targets, first outlined in November 2025 — 95,000 (base case), 76,000 (bear case), and 1,07,000 (bull case) — and noted that the “Sensex is the cheapest in gold terms.”
It added that trailing 12-month index performance is among the worst historically, while relative valuations are at previous trough levels.
Total BSE market capitalisation fell below the $5 trillion mark for the first time in a month, standing at $4.85 trillion (Rs 447.18 lakh crore).
Compared with other Asian markets, Indian equities performed relatively better. South Korea’s benchmark index plunged 12.06%, making it the worst performer in the region, and has fallen 18.5% over the past two days. Thailand (down 5.58%), Indonesia (down 4.57%), Taiwan (down 4.35%), and Japan (down 3.61%) were among other major laggards. Indian markets were closed on Tuesday on account of Holi.
Market volatility, as measured by the India VIX index, surged 23.4% to 21.37 — its highest closing level in 10 months (since May 9, 2025).
Overall market breadth was negative, with 3,245 losers against 1,053 gainers on the BSE. Barring IT, which posted a modest gain of 0.11%, all other sectoral indices ended in the red. Metal, PSU banks, realty, oil & gas, auto, consumer durables, and financial services were the top laggards, each falling over 2%.
Tata Steel, L&T, Bajaj Finance, UltraTech Cement, and NTPC were the top Sensex losers, declining by up to 6.76%. Bharti Airtel, Infosys, and Tech Mahindra were the only gainers among the 30 Sensex constituents.
L&T and HDFC Bank together accounted for 354 points, or 31%, of the Sensex’s 1,123-point decline.