Indian markets extended their decline for the fourth consecutive session as escalating tensions in West Asia continued to rattle global markets. The Sensex lost 1,456 points (1.9%) to close below the 75K mark at 74,559 points, with 29 of the 30 Sensex stocks closing in the red. According to The Times of India, investors' wealth, measured by BSE's market capitalisation, is now down by ₹19 lakh crore at about ₹456 lakh crore since hitting a recent high of ₹475 lakh crore on Thursday, May 7. The decline comes as fresh tensions in West Asia lifted crude oil prices to over $105 per barrel level, leading to continuous foreign fund outflows and sustained selling across financial markets.
S&P Global Ratings has dismissed concerns surrounding foreign capital outflows from India, stating that foreign outflow worries are overstated. According to reports from The Times of India and Bloomberg, YeeFarn Phua, Director for Sovereign and International Public Finance Ratings for Asia at S&P Global Ratings, made these remarks during an interview on Friday. The rating agency believes India is handling global financial headwinds more effectively than the headline figures indicate. Phua noted that fears regarding net foreign investment outflows have been 'somewhat overstated,' explaining that a large part of these outflows reflects profit repatriation rather than weakening investor confidence. She emphasized that gross inflows into the country continue to remain healthy. Recent data shows that foreign capital is walking out the door with global funds withdrawing roughly $1.6 billion from Indian equities in December alone, but S&P maintains its positive outlook on India's economic fundamentals.
India's current account deficit has narrowed over the past few years, though fluctuations in global crude prices now pose a risk to that improvement. As reported by The Times of India, S&P noted that the country has adequate financial buffers to manage a wider current account deficit that could emerge due to rising crude oil prices. This assessment comes as the Iran conflict has triggered an oil price shock, adding pressure to India's external accounts. To reduce the economic impact of the Iran war, India is examining a series of emergency measures aimed at strengthening foreign exchange reserves, including the possibility of raising fuel prices and restricting non-essential imports such as gold and electronic products.
Latest data showed India received net foreign direct investment inflows worth $4.6 billion in February after recording outflows for six straight months. According to The Times of India, continued foreign fund withdrawals have further weighed on domestic markets, with both the rupee and Indian equities underperforming several regional peers. The recovery in February suggests some stabilization in foreign investment flows despite ongoing global uncertainties. The assessment comes at a time when the Iran conflict has triggered an oil price shock, while persistent selling in domestic equities has pushed the rupee to fresh record lows. Analysts project the rupee could reach 92 per dollar by March, reflecting the cost of misplaced loyalties and global energy crisis impacts.
The government has already implemented measures to preserve forex for essential items, including raising customs duty on gold and silver from 6% to 15% to ensure food security. As reported by The Times of India, S&P's confidence in India's economic fundamentals contrasts with the challenging market conditions facing the country. The rating agency's positive outlook strengthens confidence in India's macroeconomic fundamentals after S&P upgraded the country's sovereign rating to BBB from BBB- in August and maintained a stable outlook. Phua concluded that 'the broader picture is that the Indian economy remains fundamentally strong and continues to offer substantial investment opportunities'. Despite current challenges, India remains one of the fastest growing major economies globally, with its democratic structure and population of more than 1.4 billion ensuring continued growth potential.
