Indian equity markets will remain under pressure on Monday as well, with no respite from the bears. Analysts expect volatility to continue amid escalation in the war between Iran and US-Israel forces. With crude prices rising and the rupee tumbling to a new low, analysts expect the weakness trend to continue. However, the market may attempt a bounce back in the latter half of the day.
Weak global cues signal sharp gap-down opening
Gift Nifty at 22,820 signals that Nifty may shed around 350 points at open. Asian markets have opened deep in the red, with Japan’s Nikkei declining nearly 4.6% and South Korea’s Kospi falling over 6%, underscoring a broad-based risk-off move. According to analysts, while the U.S. may be able to absorb shocks through currency strength and liquidity, emerging markets, particularly in Asia, are far more vulnerable.
Oil surge and geopolitical risks weigh on sentiment
Hariprasad K, Founder, Livelong Wealth, said the escalation in rhetoric between the United States and Iran, particularly around the strategic Strait of Hormuz, has heightened fears of potential supply disruptions in global energy markets. “Any threat to this critical oil transit route has immediate implications for inflation and global growth expectations”.
What is increasingly noteworthy is the evolving nature of the conflict, reflecting a visible shift in the dynamics of modern warfare, Ponmudi R, CEO of Enrich Money. Iran has intensified the use of long-range missiles and low-cost drone warfare, redefining modern warfare strategies. High-cost defence systems are being challenged by low-cost offensive tactics, and this shift is now being closely watched by global markets. “India, being a major oil importer, is directly exposed to rising crude prices, which translate into higher inflation, pressure on the rupee, and continued foreign investor outflows. This is clearly negative for equities in the near term.”
There is also a rising risk that any disruption to critical infrastructure, such as energy, power, or water supply, could push the Middle East into a deeper economic and humanitarian crisis, with broader global financial implications, he warned.
FII outflows, rupee weakness add to pressure
Foreign institutional investors continue to remain aggressive sellers, with substantial outflows exerting additional pressure on both equities and the currency. The interplay between rupee weakness and FII selling is creating a reinforcing negative cycle, limiting the scope for any meaningful recovery in the near term, observed Hariprasad.
“Volatility remains elevated, with India VIX hovering around 22, indicating sustained uncertainty and heightened risk perception. With derivatives expiry approaching, the possibility of sharp swings in volatility cannot be ruled out. Any sudden cooling in VIX could trigger accelerated time decay in option premiums, increasing risk for traders holding long option positions,” he further said.
Volatility high; markets may see sharp swings
According to Ponmudi, “This expected weakness is driven by global sell-offs, elevated volatility, and persistent FII selling, which continues to weigh on market sentiment. The market has entered a highly volatile and news-driven phase. Any signs of de-escalation could trigger sharp short-covering rallies, but until clarity emerges, risk-off sentiment is likely to persist. In such an environment, discipline and risk management become more important than directional conviction.”