Indian equity markets witnessed a sharp downfall on Friday, in line with all global markets which experienced a profound risk-off sentiment due to increasing geopolitical risk between Israel and Iran rattling world financial markets. Both the Nifty 50 and Sensex took a big gap down opening, heading lower at the open and remaining in the bearish zone for the rest of the day with all sectoral indices – barring the Nifty IT index – displaying red.
The Nifty 50, having snapped a six-day winning streak yesterday, continued its downward trajectory, opening down over 400 points at 24,473. It continued to stay under pressure for the entire session, even crossing the important 24,500-level intraday. Likewise, the BSE Sensex tanked more than 1,200 points in early trade, opening at 80,427.81. The Sensex was down more than 900 points trading below the 80,800 mark, while the Nifty was around the 24,600 mark showing a strong selling presence.
All 30 stocks in the BSE Sensex were trading in the red, with heavyweights like L&T, Adani Ports, Tata Motors, Reliance Industries, Kotak Bank, SBI, and HDFC Bank leading the declines. On the Nifty 50, only two stocks, ONGC and BEL, were able to open in positive territory, with the former gaining from the sharp jump in crude oil prices and the latter from defensive buying in the defense sector.
Broader markets came under pressure as well with Nifty Midcap 100 and Nifty Smallcap 100 indices declining 1.44% and 1.59% respectively which shows the development of widespread profit booking. All sectoral indices were in the red, with Nifty Oil & Gas, IT, PSU Bank, and Auto indices seeing losses of up to 2%.
Global Headwinds Now In The Spotlight
The main spark that ignited today’s market rout was the US-China frosty relations resurrected by the abrupt escalation of geopolitical tensions in the Middle East. The news hit early this morning that Israel had struck Iran’s capital, Tehran, and its nuclear and military facilities, sparking a huge initial surge in global risk aversion. This unprecedented military action has renewed fears of an Israeli-Iranian escalation into a larger regional conflict in the Middle East, causing investors to panic and flee toward safe-haven assets.
The clearest economic effect of this conflict was on crude oil prices. Brent crude oil futures soared today, at one point rocketing more than 13% to cross above $78.5 per barrel. This steep escalation in crude prices, while positive for producing countries, is a big daunting headwind for oil-importing countries such as India, as it escalates the worries related to inflation dynamics and affects the margins of corporations.
European markets opened lower on the news as investors fled to safety from the fears caused by the Middle East. Japan’s Nikkei, China’s Shanghai Composite, Hong Kong’s Hang Seng, and South Korea’s Kospi all closed in the red, creating a negative lead for Indian equities. US CPI data for May showed consumer inflation tracking a bit higher, 2.4% but still beneath forecasts. The US Market overnight had closed a little higher Thursday, up on the back of softer US. Unfortunately, this cheery outlook was hardly able to catch its breath before getting trumped by the unfolding geopolitical situation.
Domestic Data and FII Outflows
Adding to the confusion born of the global turbulence was India’s own economic data, which offered a mixed picture. The CPI data for May 2025, released on June 12, revealed that India’s retail inflation dropped to 2.82%, from 3.16% in the previous month, April. This is the lowest since February 2019, and this was largely due to a positive base effect and the steep decline in the price of vegetables and pulses. The first market response was overshadowed by external developments.
Also check:- Indian Equities Edge Lower Amid Global Headwinds and Domestic Cues
On the institutional front, Foreign Institutional Investors (FIIs) continued to rush for the exits as they sold shares worth ₹3,831 crore in the cash segment on Thursday. Domestic Institutional Investors (DIIs) acted as a counter-force by buying equities to the tune of ₹9,393 crore. On the derivatives front, FIIs raised their net short positions to show a negative view.
Even the Indian Rupee showed a risk-off tone, as it lost ground against the Dollar. The estimated cost of the RE growth scenario As of writing this report, the USDINR pair was trading in the 85.69 range – closed yesterday at 85.54. In fact, the fortifying of the US Dollar as a safe haven currency was a big factor leading to the Rupee’s fall.
Looking forward, market participants will continue to be very attentive to additional happenings in the Middle East and the broader trajectory of global crude oil prices. Indeed, even though there are tentative signs of domestic inflation easing, the external environment presents a massive headwind. Volatility will probably continue in the near term, as investors continue to be skittish and run to safety in defensive sectors.
