The Indian stock market is currently experiencing significant turmoil. The ongoing conflict in the Middle East has severely impacted Dalal Street, erasing $447 billion from India’s market capitalisation. This is quite close to the $508 billion loss witnessed during the COVID-19 pandemic market crash. The Sensex and Nifty have seen sharp declines, while FII selling has further increased market volatility. This war-driven sell-off has created panic among investors.
Let us understand the entire matter in detail and see what it means for investors.
What’s Happening?
Fears of war between Iran and the US–Israel alliance in the Middle East have created a risk-off sentiment across global markets. Crude oil prices have crossed $100 per barrel, raising concerns about inflation, energy security, and India’s trade deficit, as the country is the world’s third-largest crude oil importer. Potential disruptions in the Strait of Hormuz have further heightened energy security concerns.
As a result, on March 13, 2026, the Sensex fell more than 1,300 points in a single session and has dropped over 10% from its recent peak. The Nifty 50 also declined sharply, with both indices approaching one-year lows. In just one week, $240 billion of investor wealth was wiped out. Since the war began, the total market capitalisation has fallen to $4.7 trillion, reflecting a loss of about $447 billion.
FIIs’ Continuous Selling
So far in 2026, FIIs have remained net sellers in Indian equities, with total net selling of Rs 1,07,575 crore. On March 13, 2026 alone, selling stood at Rs 10,716 crore, marking the largest single-day outflow since October 2025.
In contrast, DIIs have bought Rs 1,68,965 crore, providing some support to the market. However, global uncertainty, high crude prices (Brent at $103.14), and a shift towards US Treasury bonds have weighed on FII sentiment. This has also put pressure on the rupee and increased market volatility.
Nifty IT Index Enters Bear Territory and Sectoral Impact
On March 13, the Nifty IT index entered bear territory with a decline of more than 20% so far this year. This marks the steepest January–March fall since 2008, and the index recently touched a 52-week low of 29,117.20. All IT stocks within the index remained in the red.
Sectoral losses in the broader market have been widespread. Banking and financial stocks were among the most affected, while auto companies recorded the worst weekly performance due to rising fuel costs. The infrastructure and aviation sectors also faced pressure as higher fuel prices increased operating costs.
The notional decline in the Nifty is estimated at 24.17% over the last 18 months (with a point-to-point fall of 9.37%). However, historically this is not the steepest fall. During the COVID-19 pandemic crash, markets fell by 39%, while the Global Financial Crisis saw a 60% decline and the dot-com bubble led to a 53% drop.
What Does This Mean for Investors?
The situation appears challenging, but there are some positive aspects as well. According to Mint, five factors could bring FIIs back to Indian markets: crude oil prices stabilising below $85–90 per barrel, US Fed rate cuts, strong macroeconomic stability, policy consistency, and improvement in earnings growth and valuations. Strong corporate earnings and attractive valuations in sectors such as banking, infrastructure, and manufacturing could make India relatively more appealing compared to other emerging markets.
According to an analysis by the Economic Times, the current decline appears to be a stress-driven correction rather than a structural bear phase. The Nifty’s P/E ratio is currently around 21x, which is considered to be within the fair valuation range. Mid-cap and small-cap stocks have already seen corrections of nearly 25%, which may encourage investors to start researching quality stocks more closely.
What’s Next?
If tensions in the Middle East ease and crude oil prices stabilise, markets could gradually recover. Potential US Fed rate cuts may also bring back capital flows to emerging markets. Strong domestic growth, controlled inflation, and a stable rupee could further support FII inflows.
Historically, geopolitical crises have often resulted in temporary market corrections. Continued support from domestic institutional investors may help stabilise the market. Long-term investors may consider using such periods of volatility to gradually accumulate quality stocks. However, if geopolitical tensions escalate further, market volatility may continue for some time. Overall, this may be a phase where investors focus on long-term fundamentals and remain patient.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
