The bearish sentiment weighed down on the Indian equity market as major benchmark indices have fallen almost 2,500 points or 3 per cent in the past five sessions.
The strengthening of the dollar and weakening
of the rupee, coupled with the faltering of hopes on the Iran-US peace deal, with elevated crude oil prices, have raised concerns among investors, leading to a panic selloff. Over Rs 11 lakh crore of investors’ wealth has been eroded in the past four sessions, marking a major reversal and bearish momentum.
Interestingly, the US and Asian markets are performing better relatively compared to the Indian market.
Sensex crashed over 1200 points on Tuesday, continuing its loss rally by dropping 2500 points in the past five sessions to trade around 74,805. Meanwhile, Nifty dropped 348 points to below 23,500.
Meanwhile, the tech-heavy NASDAQ Composite surged over 4 per cent during the period, supported by continued optimism around artificial intelligence and technology stocks.
Asian markets also witnessed strong momentum, led by Japan and South Korea. Japan’s Nikkei 225 jumped more than 5.6 per cent over the past five sessions, touching fresh 52-week highs, while South Korea’s KOSPI rallied nearly 8 per cent, driven by strong investor interest in semiconductor and AI-linked companies.
Experts believe India’s higher dependence on imported crude oil and premium market valuations have made domestic equities more vulnerable during the current phase of geopolitical uncertainty.
Why Is Indian Market Beaten Down While US and Asian market Rising?
This divergence is primarily due to India’s sensitivity to external economic shocks, arising from increased fluctuations in crude oil prices and falling capital flows, according to Pranay Aggarwal, Director and CEO of Stoxkart.
Unlike several Asian economies, Aggarwal added, that are either commodity exporters or less reliant on imported energy, India imports a significant portion of its crude oil requirements. “With the increase in tension between Iran and the US, concerns regarding potential supply disruption in Middle East has led to an increase in oil prices, raising uncertainty about inflation, fiscal stability, and corporate profitability in India,” he said.
Crude oil sensitivity weighs on sentiment
According to market participants, India remains more exposed to external shocks compared to several Asian peers because the country imports a large share of its crude oil requirements. The rise in geopolitical tensions in the Middle East has fuelled concerns over possible supply disruptions, pushing oil prices higher and increasing worries around inflation, fiscal stability and corporate profitability.
Experts noted that elevated crude prices could widen the current account deficit and raise imported inflation, which may adversely affect sectors dependent on fuel and raw material costs.
They added that while some Asian economies are benefiting from commodity exports or stronger positioning in the artificial intelligence and semiconductor cycle, India lacks meaningful representation in those themes, limiting market support during global uncertainty.
FII outflows and rupee depreciation add pressure
Analysts said foreign institutional investors (FIIs) have also turned cautious amid global risk aversion, leading to persistent selling in Indian equities. Since Indian markets have seen strong foreign participation over the past few years and remain relatively liquid, they often witness sharper outflows during periods of uncertainty.
A weaker rupee has further worsened investor sentiment. Experts pointed out that currency depreciation reduces effective returns for overseas investors even when underlying equities perform well, making Indian assets relatively less attractive.
Valuation concerns amplify correction
Market experts highlighted that Indian equities were already trading at relatively expensive valuation multiples before the recent geopolitical escalation. As a result, investors are now reassessing whether earnings growth can justify premium pricing in an environment marked by rising oil prices and global uncertainty.
According to Puneet Singhania, Director at Master Capital Services Limited, the ongoing market divergence is not solely linked to the Iran-US conflict but also reflects India’s positioning relative to other Asian economies benefiting from the AI-led rally.
He said markets such as the US, South Korea and Taiwan continue to receive support from the semiconductor and artificial intelligence theme, while India lacks significant exposure to these sectors.
Near-term outlook remains volatile
Experts expect volatility to continue in the near term, with market direction likely to remain dependent on geopolitical headlines and crude oil movements.
However, analysts said the current weakness should be viewed more as a phase of macro-driven volatility rather than a sign of deterioration in India’s long-term fundamentals.
They believe that if geopolitical tensions ease and oil prices stabilise, Indian equities could recover with support from domestic growth, retail participation and earnings resilience in select sectors.
In the near term, investors may continue favouring defensive and energy-linked sectors while remaining cautious on industries heavily exposed to fuel costs.
Experts also advised investors to avoid reacting to short-term market swings and instead focus on gradually building positions in structurally strong themes such as domestic consumption, capital expenditure-linked sectors and quality financial stocks through a staggered investment approach.
