India's benchmark indexes closed lower to log their worst week in over a year on Friday, as the escalating U.S.-Israeli war with Iran sent crude prices surging and soured global investor sentiment.
Brent crude rose to a 20-month high of $87.66 per barrel on Friday and is on course for a 20% jump this week, the sharpest rise since March 2022 in the aftermath of Russia's invasion of Ukraine. Higher oil prices are typically negative for India, the world's third-largest crude importer.
Markets fear that a broader energy-supply shock could substantially increase inflationary pressures and strain India's current account and fiscal balance.
The Nifty 50 fell 1.27% to 24,450.45 on Friday, while the BSE Sensex dropped 1.37% to 78,918.9, with heavyweight financials leading the drag. For the week, the Nifty and Sensex lost about 2.9% each, marking their steepest weekly decline since February 28, 2025 and December 20, 2024, respectively.
The market is taking into account the near-term threat from oil prices, said Pankaj Pandey, head of retail research at ICICI Securities. "However, we don't yet see a macroeconomic impact from this as the broad expectation is that crude prices will not remain elevated for a long period.
The rupee ended a tad lower on Friday and logged its worst weekly fall in over a month.
Fifteen of 16 major sectors fell this week, while small-caps and mid-caps declined 2.5% and 2.9%, respectively. State-owned banks lost 6.5% on fears that higher crude could lift government borrowing costs, push bond yields up and compress treasury gains. Financials and banks fell about 4.5% each.
Oil and gas dropped 3.9%, as oil marketing companies BPCL, HPCL and IOC fell. Among other stocks, Larsen and Toubro slipped 2.2%. It fell at 7.7% for the week, its worst since May 2020, as investors priced in Middle East exposure.
Interglobe Aviation fell 2.4% on Friday and 8.8% on the week, the worst in three months, on worries that higher fuel costs and moderation in international air traffic could dent quarterly earnings.
"While the conflict dragged equities this week, it's not all gloom," said Samrat Dasgupta, chief executive officer of Esquire Capital Investment Advisors.
"The U.S. has already said it will not put troops on the ground, which suggests the conflict may not rage on for more than a few weeks, creating a compelling window for investors to accumulate stocks at reasonable valuations."
