Indian shares set to fall as Iran conflict weighs on crude prices, foreign flows

Indian stock markets were bracing for a weak open on Friday morning as crude oil prices remained stubbornly elevated and foreign investors continued their retreat from the country's equities. The backdrop was a grinding conflict between the United States, Israel, and Iran that had already erased roughly seven percent from the country's two main benchmarks since fighting began. Futures trading suggested the Nifty 50 would dip below its previous close of 23,306 points, with GIFT Nifty contracts sitting at 23,144 as of early morning.

The immediate trigger was a stalled diplomatic process. U.S. President Donald Trump had announced he would extend a pause on strikes against Iranian energy infrastructure into April and claimed negotiations were progressing well, but an Iranian official dismissed the American proposal as fundamentally skewed in Washington's favor. That gap between stated optimism and actual progress had been enough to keep oil hovering near $106 per barrel, a price point that ripples through India's economy in ways both immediate and delayed. Across Asia, stocks had fallen 1.2%, and Wall Street had slipped into correction territory, with the Nasdaq confirming the technical threshold.

For India specifically, the oil price problem cuts deep. The country imports most of its crude, meaning every dollar per barrel translates into higher costs for fuel, transportation, and electricity. The Reserve Bank of India had just reaffirmed its retail inflation target at 4 percent on Wednesday, nestled within a comfort band of 2 to 6 percent. Consumer prices had actually cooled to 2.75 percent in February, suggesting the central bank had room to breathe. But officials were already warning that the combination of elevated global oil and the supply disruptions flowing from the Iran war would push inflation above the 4 percent target once the new financial year began in April. That forecast hung over the market like a weight.

Foreign investors were voting with their feet. Portfolio investors from abroad had yanked $12.14 billion out of Indian stocks during March alone, putting the month on track for record monthly outflows. The selling had been severe enough to drag the rupee to all-time lows, a secondary consequence that makes imports even more expensive and compounds the inflation problem. The two main benchmarks, the Nifty 50 and Sensex, had each surrendered 7.4 percent since the war began, a loss that reflected both the direct oil shock and the broader unease about what sustained conflict might mean for growth in Asia's third-largest economy.

One stock commanding particular attention was HDFC Bank, the heaviest holding on both indices. The bank's part-time chairman, Atanu Chakraborty, had abruptly resigned on March 18, and India's markets regulator had opened a preliminary review of his departure for possible violations of rules governing directors of listed companies. The Financial Times reported the resignation stemmed from a power struggle with chief executive Sashidhar Jagdishan. The stock had fallen 11.7 percent across three trading sessions after the announcement but had recovered 5.1 percent over the two most recent sessions, suggesting some stabilization or bargain hunting.

Elsewhere in the market, there were scattered bright spots. Lupin had received tentative approval from the U.S. drug regulator for a treatment for cataplexy and excessive daytime sleepiness. Aurobindo Pharma's subsidiary had signed a marketing and distribution agreement with Germany's STADA Arzneimittel. Life Insurance Corporation of India, meanwhile, faced a tax demand of 61.47 billion rupees with an additional 9.53 billion in interest, a significant liability that would weigh on the company's finances. But these individual stories played out against the larger current: an economy watching oil prices, waiting for inflation to rise, and seeing foreign money leave the country as geopolitical risk remained unresolved.