Indian markets plunge as Strait of Hormuz tensions, FPI outflows collide

Monday morning on Dalal Street opened not with the usual hum of opportunity but with the sound of retreat. The BSE Sensex plummeted 1,842 points—a loss of 2.3 percent—in the opening hours of March 23, 2026. The NSE Nifty fell nearly 585 points to hover around 22,530. By 10:30 a.m., the Sensex had touched 72,690.52, its low for the session, while the Nifty bottomed at 22,529.05. The selling was indiscriminate. All 16 major sectors on the NSE declined. Small-cap and mid-cap indices each shed more than 3 percent. This was not a correction in one corner of the market; it was a broad erasure of value across the entire landscape.

Two forces collided to create the wreckage. The first was geopolitical. The US-Iran conflict, now four weeks old, had pushed Brent crude to around $113 per barrel. For India, one of the world's largest oil importers, this was not an abstract concern. The Strait of Hormuz, the narrow passage through which a substantial portion of India's energy supplies must travel, remained under threat. The previous week had driven the point home with visceral clarity: two Indian liquefied petroleum gas tankers had navigated those waters under fire. The market understood what that meant for India's import bill, for inflation, for the central bank's policy options. The anxiety was not theoretical.

The second force was financial. Foreign Portfolio Investors had been selling. In the month of March alone, they had offloaded nearly ₹90,000 crore worth of Indian equities—a pace that would make March the heaviest month for foreign outflows since October 2024. On Friday alone, they had pulled ₹5,518.39 crore. Domestic institutional investors had tried to cushion the blow, buying ₹5,706.23 crore that same day, but their efforts had proven insufficient. The market could not absorb the weight of foreign capital fleeing.

The rupee, meanwhile, had begun its own descent. On Monday it hit a record low, surpassing even the previous record it had set just the Friday before. For companies that imported raw materials, that bought equipment from abroad, that had foreign currency liabilities, the message was clear: the cost of doing business had just risen. The currency weakness compounded the anxiety that already hung over import-dependent sectors.

Two of India's largest banks were nursing separate wounds that deepened the market's distress. HDFC Bank fell as much as 4 percent, extending losses that had begun the previous week when Atanu Chakraborty, the part-time chairman, had resigned abruptly over ethical concerns. The resignation had raised questions about governance and judgment at one of India's most prominent financial institutions. State Bank of India fell more than 4 percent after the Income Tax Department issued a demand for ₹6,337 crore related to the assessment year 2024. The banking sector, which typically anchors investor confidence during turbulent periods, was itself becoming a source of concern rather than reassurance.

What had begun as a geopolitical tremor—conflict in the Middle East, oil prices climbing—had metastasized into something broader: a loss of confidence in the stability of Indian assets, a questioning of the rupee's trajectory, a sudden awareness that even the largest and most trusted institutions carried hidden liabilities. The market was repricing risk, and the repricing was swift.