Tensions in the Middle East and FII Sell-Off Lead to Nearly 3% Drop in Indian Markets This Week

Mumbai, March 7: This week, the Indian stock market experienced significant volatility due to escalating tensions in the Middle East and persistent sell-offs by foreign institutional investors (FIIs). By the end of the week, both the Sensex and Nifty indices dropped nearly 3%, raising concerns among investors.

During the week, both major indices recorded a decline of approximately 2.9%. The Sensex fell from 81,287.19 to close at 78,918.90, while the Nifty slipped from 25,178.65 to end at 24,450.45.

Throughout this period, FIIs continued their selling spree, withdrawing over ₹23,000 crores from the Indian market. This cautious approach by foreign investors is attributed to a global risk-averse strategy.

However, strong investments from domestic institutional investors (DIIs) helped mitigate some of the market’s decline.

Rising geopolitical tensions in the Middle East have also led to an increase in crude oil prices, with Brent crude nearing $86 per barrel, contributing to a climate of concern in the markets.

In addition to the main indices, broader markets also faced pressure. The BSE Midcap and BSE Smallcap indices recorded declines of nearly 3% during the week.

Sector-wise, most indices closed in the negative territory. The steepest declines were seen in the BSE Realty, BSE Oil and Gas, BSE Bankex, BSE Auto, and BSE Consumer Durables, which fell by 4.9%, 4.8%, 4.6%, 3.9%, and 3.1%, respectively.

Conversely, the BSE Capital Goods Index saw a slight increase, closing up by 0.2%. Additionally, shares in the defense sector rose by nearly 3%, as investor interest in defense companies grew amid global tensions.

According to Vinit Bolinjkar, Head of Research at Ventura Securities, the Indian stock market this week reflected a tug-of-war between global risks and domestic strength.

He noted that the ongoing sell-off by FIIs indicates their adopted ‘risk-averse strategy’ due to global uncertainties and rising energy prices.

Nonetheless, the consistent inflow of funds from domestic institutional investors and through SIPs has supported the market, preventing a deeper decline.

Analysts suggest that the Nifty50 index is approaching its 200-day moving average around 24,450. Despite this, the strong participation of domestic investors keeps the long-term outlook for the market robust.

Meanwhile, market volatility has increased. During the trading session, the India VIX index surged by over 11%, indicating that investors are currently in a risk-averse mode.

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