Indian benchmark indices experienced severe volatility on Friday, with the BSE Sensex closing 1,092.06 points or 1.44% lower at 74,775.74 and the NSE Nifty ending 359.40 points or 1.50% lower at 23,547.75. According to The Economic Times, the decline was largely driven by outflows related to MSCI index rebalancing worth ₹8,000-8,500 crore, which were slightly higher than previous instances due to float adjustments in certain names like Bajaj Finance, HUL, TCS, and others. The Nifty and Sensex posted losses for the month, slipping 1.9% and 2.8% respectively, with both indices on track to post modest gains before selling in the last 30 minutes sent shares tumbling. For May, foreign investors sold shares worth ₹49,192 crore.
Market sentiment turned extremely cautious after reports emerged that the United States launched fresh strikes in southern Iran despite ongoing diplomatic engagement between Washington and Tehran. According to reports citing US Central Command, the strikes were carried out to protect American troops from Iranian forces operating in the region. The latest escalation has once again intensified concerns over stability in West Asia and cast uncertainty over negotiations linked to reopening the Strait of Hormuz, a critical global energy corridor. This development has significantly amplified geopolitical tensions affecting global markets. However, as per The Economic Times, the extension of the tentative ceasefire deal by 60 days eased oil prices but did little to improve sentiment in equities, with Donald Trump yet to sign off on it.
Brent crude oil futures eased about 2% to nearly $90 on Friday after rising 0.5% on Thursday, according to The Economic Times. The rebound in oil prices is expected to keep inflation concerns elevated for import-dependent economies such as India, while also affecting currency movements and corporate profitability. The latest geopolitical developments have further strengthened oil prices amid heightened Middle East tensions, though the tentative ceasefire extension has provided some relief from the previous sharp price increases.
All sectoral indices ended lower on Friday with the IT index bucking the weak trend, as reported by The Economic Times. Nifty Oil & gas dropped 2.5% while Nifty Metal and Auto indices fell around 2%. Nifty Consumer Durables and FMCG indices declined close to 1.5% while Bank Nifty slid 1.1% lower. Out of 4,463 shares traded on the BSE, 1,611 advanced and 2,673 declined. The Nifty Midcap 150 index declined 1.4% while the Nifty Smallcap 250 ended 0.7% lower, though both had gained 1% and 1.2% respectively in the past week.
The India VIX volatility index jumped 8% to 16.2 on Friday, suggesting traders are not convinced that risks have subsided, according to The Economic Times. Vipin Kumar from Globe Capital Market noted that Nifty is stuck in a downward sloping range of around 24,000 levels on the higher side and 23,250-23,000 on the lower side, levels unlikely to be broken in the coming week. Foreign portfolio investors sold shares worth a net ₹21,105.9 crore on Friday, while domestic institutional investors bought shares worth ₹16,764.1 crore. Abhilash Pagaria from Nuvama Wealth expects overseas investors could continue churning large-cap holdings, but the broader market remains resilient and poised for outperformance.
