The sharp decline comes amid broader market weakness, as the rupee hit fresh lifetime lows and US bond yields gained, amid persistent FII selling and escalating war between Iran and the US-Israel. Indian rupee extended its sharp decline against the US dollar, falling to 93.84 against the US dollar to break its previous all-time low of 93.7350, which it had hit on Friday. The rupee, which is one of the most exposed currencies to oil price increases, has weakened nearly 3% since the war in the Middle East began.Foreign investors have been strongly selling Indian equities since the beginning of the war in the oil-rich Middle East amid a global risk-off sentiment in markets. FIIs extended their selling streak for the 16th consecutive session on Friday, net selling Indian shares worth Rs 5,518 crore, according to data on NSE.
The fall in bank stocks also comes amid concerns over what impact prolonged Middle East war and elevated oil prices can have on the Indian economy. While India is not directly involved in the war between Iran and the US-Israel, the rising oil prices and other factors may bear an impact on the Indian economy in the short term, as per analysts. “With 80% energy import dependence, higher crude prices directly impact the growth, current account deficit (CAD), inflation, the rupee, and fiscal balances. The overall macro effect will depend on the pass-through to consumers and government interventions through duties, subsidies, and fuel price controls,” said Motilal Oswal Financial Services in a report earlier this month.
Also read: Rs 13 lakh cr rout! 7 key factors behind today’s D-St bloodbath
“A USD10pb rise in oil could add 30–50bp to inflation, with CPI potentially approaching 5% if crude averages USD100pb. These risks are further amplified by shipping disruptions, higher war-risk insurance premiums, rising fertiliser prices, and vulnerabilities in LPG supply, increasing the likelihood of broader energy and food price pressures,” the brokerage added.
Technical view
Bank Nifty has witnessed a breakdown in short-term structure, indicating a shift towards a lower high–lower low formation, said Vatsal Bhuva, Technical Analyst at LKP Securities. “RSI at 28 signals an oversold condition, suggesting a possible pullback; however, the broader bias remains negative, with a sell-on-rise approach preferred in the 54,500–56,000 resistance zone,” the analyst said.
Bajaj Broking also noted that the index last week formed a high-wave candle with a lower high and lower low, signalling continuation of the corrective decline. “Volatility is likely to remain elevated in the near term, driven by uncertain global cues and rising geopolitical tensions, which continue to weigh on market sentiment,” it added.
Also read: Gold extends fall after worst week in 43 years. More pain or time to buy the dip?
A sustained move below Thursday’s low of 53,240 could trigger further downside, with potential targets at 52,500 and 51,800 in the coming sessions, according to Bajaj Broking, adding that these levels correspond to the 61.8% Fibonacci retracement of the rally from the January 2025 lows and coincide with the low of the breakout candle formed in April 2025.
“On the upside, the Thursday gap zone between 54,689 and 54,150 is expected to act as immediate resistance. The overall bias remains bearish as long as the index stays below this zone,” it added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)