Analyze how global conflicts, oil prices, and tariffs impacted the Indian stock market, Sensex, and Nifty, driving volatility and investor sentiment
Suresh Chandra Sarangi
The stock market generally acts like a regulated, supply-driven marketplace, allowing companies to raise money via. IPOs (primary market) and the investors are to trade shares amongst themselves, in the (secondary market), on an organised platform. The Indian stock market is a regulated, digital system with two primary exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), both controlled by the Securities and Exchange Board of India (SEBI). Until writing this article in the morning, it was volatile and uncertain, and the Sensex and Nifty were jumping like anything. The news of holding back the gulf war for two weeks, on the condition that the opening of the Strait of Hormuz, with consequent reduction in the price of oil by oil marketing companies like Brent Crude, has already boosted the sentiment amongst the investors, and both Sensex and Nifty have shown remarkable resilience, for the time being, with a free ride upward.
Sensex and Nifty had best exhibited renewed volatility in FY 26. The volatility in the market was because of the global headwinds. There was already concern regarding the stretched volatility, on account of Trump’s tariff, and it continued thereafter, due to the Iran_Israel and America war, a blatant blow to both regional peace in West Asia and World peace. Actually, before November 2025, there were some concerns regarding the overvaluation of scrips. The combined effect of Trump’s tariffs was a serious issue that marred Indian exports, and the result was consequential. Trade-related disruption was total with a 50 percent Trump tariff.
Apart from that, there was a muted political tension arising out of the Russia-Ukraine war. This continued after the Gulf War and Iran stopped oil flow, 20 percent of the world’s daily requirement, to a standstill, and crude prices surged past 100. This also led to flight of capital from the Indian market, and the FIIs withdrew as the Rupee was crashing, and the market’s lacklustre performance. Equity outflows amounting to US$20 billion in 2026 are the highest ever recorded,but still counting. This resulted in a decline of 7.1percent in the domestic equity indexes. Losses were concentrated in sectors like FMCG,IT, and real Estate sectors, though the auto and metal sectors were at their peak. The yellow metal-driven stocks in the equity market, the gold and silver ETF funds, fared well, as did silver, zinc, aluminium, and copper.
The journey of the Indian equity market has been quite topsy-turvy, because of certain factors and its effect has affected the market to for which the market remained volatile. In such a situation, the investors are at their wits’ end. It appears that the bull run had ended, and the market was under a tight bear grip. During quarter 1 of 26, the performance of the market was better. Equity market saw a steady inflow of US$,7.8billionsand buoyed by that, the Sensex rose by approximately 4.5%. But all good things come to an end, and the Trump Tariff effect pulled the market down, with the bears dancing and having a hearty laugh.
Outflow of around 9 billion US dollars made the investors panic-stricken, as they were afraid of the Indian domestic economy reeling under the external shock. Sensex had declined by -4%point. There was a monthly decline of around 12%. The market never looked up thereafter, with the bearish hangover having the last laugh. The zigzag graph continued, sales volume increased despite 8.2% gdp growth. Investors’ aversion towards risk became threatening, and the market was losing, with both benchmark indices having a freefall.
Though a few IPOs in the primary market registered well with astronomical numbers and more participation, the turnover was decreasing. Sector-wise performances were also getting affected. There were varied performances, without any pattern. The four sectors, like IT, Real estate, tech, and FMCG, were going down the hill. The IT sector suffered because of huge layoffs abroad as well as in India, with the arrival of AI. The job market declined, there was less hope for housing, and the real estate stock nosedived. There was less demand in the market. The increased cost of cement and other construction materials added fire to the fuel. The job losses had an impact on the FMCG sector, Banking stock also failed due to a failure to increase in deposit mobilisation, and consequently, it adversely affected funds deployment.
However, Auto, Capital goods, oil and gas, power, healthcare, and consumer durables were showing some upbeat momentum. No doubt,the reform in the Goods and Services Act has brought in good news. Diwali brought the cheers, and this saw a northbound direction in sales, along with good results for the economy. Global metal prices had surged, and that boosted the metal stocks beyond a point. Gold prices had rallied around 50%,so also, as well as silver and copper. There have been sectoral imbalances in aviation as oil prices skyrocketed,a fall in semiconductor stock, Keynes technology,etc, for which the stock market exhibited a fall.
Apart from significant growth in gold and silver stocks, the general sentiment in the equity market remained muted and subdued. The war in the Gulf was a blatant blow. Oil prices surged, and aviation fuel was costlier. There was an air traffic restriction, which caused stocks of indigo to suffer. Projects of Larsen and Toubro failed like 9 pins as its project halted in West Asia, and future payments were in question and uncertain, with so much destruction. The biggest blow was the petrodollar economy, availability of LNG and pipeline gas, and thus the stock market was receding, and the investor’s losing streak remained phenomenal.
The world was experiencing the greatest uncertainty, and the volatility in the stock market was incredible. World growth seemed to be muted, with an estimated reduction of .30 basis points. The Indian Rupee went against the dollar up to 95, the fiscal deficit was mounting, and the current account balances were diminishing, all on account of the West Asia war. It was a tumultuous year for the stock market. Now that Trump has agreed to hold back the strikes for 2 weeks, the euphoria in the stock market is palpable, and breeding pf hopes like a germinating seed. Let us hope for a good time for the Indian Stock market and the Indian economy, Peace in the Middle East, and overall global peace, stability, and progress.
(The writer is a former General Manager of Bank of India. Views expressed are personal.)
