Indian stock exchanges were closed on Thursday for the Bakri Id holiday, with both the National Stock Exchange and BSE shut for the day. In offshore trading, Gift Nifty futures dropped 0.79% to 23,655.50, signaling a cautious start for Friday's session. Traders closely monitor these futures as an early indicator of the Nifty 50's direction.
Market participants are now focusing on two emerging risks: a sharp rise in Brent crude oil prices and escalating tensions between the United States and Iran. Brent crude jumped 3.6% to $97.71 per barrel following U.S. airstrikes on an Iranian drone facility and Tehran's retaliatory response. This has dampened hopes for a swift resolution regarding the Strait of Hormuz, a critical oil shipping route.
Asian equity markets declined as investors weighed the geopolitical developments. The Nifty 50 ended Wednesday's session nearly flat, down just 0.03% at 23,907.15, while the Sensex slipped 0.19% to 75,867.8. Despite the lackluster close, both benchmarks posted modest gains of about 0.3% last week, supported by IT and financial stocks. The Nifty also reclaimed its 50-day moving average for the first time in two weeks. However, since the onset of the Iran conflict, the Nifty and Sensex have fallen 5.8% and 7.2%, respectively.
On Wednesday, HDFC Bank shares declined 2.6% after a report questioned its payment practices related to large deposits, though the bank denied any misconduct. In contrast, metal stocks gained 1.7%, led by Hindalco and Nalco, as aluminum prices hit their highest level since early 2020 on supply concerns. The rebound, however, remained narrow.
In a significant shift, Taiwan has overtaken India to become the world's fifth-largest stock market by market capitalization, driven by gains in Taiwan Semiconductor Manufacturing Co (TSMC) and strong demand for AI-related stocks. South Korea is also attracting foreign flows, with investors buying chip stocks. VK Vijayakumar, chief investment strategist at Geojit Investments, noted that India is likely to remain under pressure as this trend continues and foreign portfolio investors (FPIs) sell off Indian securities.
Foreign investors have pulled out over $23 billion from Indian markets so far in 2026, according to a Reuters poll. This outflow sets the stage for what could be the first annual decline in Indian stocks since 2015. Rajat Agarwal, Asia equity strategist at Societe Generale, cited lackluster earnings growth and India's limited exposure to the AI-driven rally seen elsewhere as reasons for the weak returns.
Looking ahead, traders are watching Friday's open to see whether the futures pressure will trigger a sell-off or if the market can absorb it. Systematix has set a Nifty range for the June series at 23,000 to 25,000, while Axis Direct sees a range of 23,000 to 24,500, with 24,000 as the key pivot. Rollover activity in futures and options has been high, even as momentum in the Nifty and Bank Nifty weakened.
Brokerages expect June to be a stock pickers' market rather than a broad index play, with metals, pharma, and power stocks seeing some accumulation. IT stocks may bounce if short sellers are forced to cover. The key risk remains a further spike in oil prices before local buyers can adjust. Madison Cartwright, senior geo-economics analyst at CBA, estimated a 70% chance of a new ceasefire but described the outlook for the Strait of Hormuz as uncertain. Kranthi Bathini, director of equity strategy at Wealthmills Securities, warned that last week's rally is unlikely to sustain unless there is a clear diplomatic signal from the U.S.-Iran front and crude drops well below $100 per barrel.
India's market took a single-day break, but it did not reset the underlying dynamics. The first 30 minutes of trading on Friday will be crucial in determining whether the holiday merely paused selling pressure or if investors used the break to reassess risks from oil, the rupee, and foreign outflows ahead of the June series.
