Indian equities closed the week in positive territory, but Friday's retreat underscored the market's vulnerability to rising oil prices. The Nifty 50 slipped 0.62% to 24,176.15, while the BSE Sensex fell 0.66% to 77,328.19. Despite the decline, the Nifty added 0.7% for the week, and the Sensex rose 0.5%.
Renewed geopolitical tensions between the U.S. and Iran pushed Brent crude above $100 a barrel, reigniting concerns about inflation, corporate margins, and the rupee. The Indian currency, which had gained 0.4% over the week, weakened on Friday to close at 94.40 per dollar after touching nearly 94.70 intraday.
Foreign portfolio investors (FPIs) sold Indian equities worth a net 41.11 billion rupees on Friday, according to The Economic Times. Domestic institutional investors (DIIs) stepped in as buyers, purchasing shares worth 67.48 billion rupees, a pattern that has become familiar during foreign outflows.
Midcap and smallcap stocks showed relative resilience. The Nifty Smallcap 250 rose 0.2% on Friday, while the Nifty Midcap 150 slipped just 0.14%. For the week, these indices gained 4.2% and 3.5%, respectively. The auto sector was a standout, jumping 5.2% for the week, driven by strong quarterly results from Mahindra & Mahindra, Bajaj Auto, and Hero MotoCorp.
State Bank of India (SBI) weighed on the banking sector after reporting quarterly profit that missed estimates, hurt by weaker treasury income. The bank reaffirmed its loan growth outlook of 13% to 15% for the fiscal year starting April and expects its net interest margin to hover around 3%. SBI Chairman C.S. Setty said the Middle East crisis has not yet disrupted credit demand but warned that if the conflict persists for five to six months and inflation exceeds the central bank's 4% target, consumption and economic activity could suffer.
Earnings season has produced mixed results. Motilal Oswal Financial Services reported a 29% year-on-year profit jump from midcap firms in its coverage during the March quarter, beating its 22% forecast. However, among the 28 Nifty companies that have reported so far, aggregate profit growth stood at just 7%.
Market participants remain cautious. Raghvendra Nath, managing director at Ladderup Asset Managers, told Reuters that sentiment is 'completely hostage to the Iran war,' adding that higher crude prices will squeeze the economy and corporate earnings further. Christy Mathai, fund manager at Quantum Mutual Fund, noted that the military confrontation kept investors on edge despite talks of negotiation.
Technical levels are being watched closely. Vipin Kumar of Globe Capital Market said a decisive move would require the Nifty to breach the 23,800 level or break out above the 24,600 level. Jateen Trivedi at LKP Securities added that the broader outlook remains sensitive to crude prices and final clarity on the U.S.-Iran proposal.
The rally's sustainability is in question. With oil above $100, the rupee under pressure, and foreign investors trimming positions, the market's ability to hold onto gains will depend on geopolitical developments and domestic earnings momentum.
