The Iran conflict entered its fifth week, Brent crude surged back above $115 per barrel, and Yemen’s Houthi movement confirmed over the weekend that it had fired missiles at Israel—its first direct involvement in the U.S.-Israeli war against Iran—all of which are known as the primary causes of Monday’s decline in Asian markets. Each of those advancements is significant on its own. Together, they conveyed to market players in Mumbai, Seoul, Tokyo, and Hong Kong that any expectation of a quick departure was likely wishful thinking and that the conflict is expanding rather than contracting. Given that the country imports about 85% of its crude, the Indian market, which is extremely vulnerable to rising oil prices, reacted to that news with a sharp and widespread selloff.
The decline was led by banking stocks in a way that merits consideration. The Bankex index was the worst-performing sector of the 38 tracked, falling between 3.62 and 3.80 percent during the session. Among the Sensex 30’s biggest losers were Axis Bank, Kotak Mahindra Bank, Bajaj Finserv, Bajaj Finance, and ICICI Bank. Increased crude prices contribute to current account deficits, weaken the rupee, increase the risk of non-performing loans in energy-dependent sectors, and complicate the Reserve Bank of India’s rate decisions, all of which make banks vulnerable to rising oil prices for reasons other than inflation. When global risk appetite is collapsing at the same time, the RBI can only do so much to stabilize the rupee, which fell toward the 95 per dollar mark on Monday.

The data on market breadth presents a striking picture of its own. Only 907 of the approximately 4,394 stocks that were traded on the BSE rose, while 3,302 fell. The advance-decline ratio in the BSE 500 universe was 0.11 to 1, which means that nine stocks fell for every stock that was able to rise. That isn’t a sector-specific or selective selloff. There aren’t many places to hide in a market that is generally contracting. With the BSE 150 Midcap index falling 2.45% and the BSE 250 Smallcap index falling 2.57%, even mid-cap and small-cap indices fell more sharply than the headline Sensex. Smaller businesses suffer the most when sentiment declines because they typically have less liquidity and fewer institutional safeguards.
The cumulative impact of this month’s foreign institutional investor story is difficult to ignore. In March alone, FIIs withdrew about ₹1.14 lakh crore, or roughly $12.3 billion, from Indian stocks, making it the largest monthly foreign withdrawal ever. FIIs sold ₹4,367 crore worth of stocks on Friday alone, but domestic institutional investors bought ₹3,566 crore to provide some counterbalance. The Sensex has been declining weekly due to a gravitational force represented by the difference between what foreign money is taking out and what domestic institutions are taking in. In Indian financial circles, March 2026 will be remembered for some time.
The image is equally cautious from a technical standpoint. Chartists characterize this situation as definitively bearish, indicating that the medium-term trend is working against recovery. The Sensex is currently trading below its 50-day moving average, which is itself below the 200-day moving average. Over the last three weeks, the index has decreased by 3.43%. If the selling pressure doesn’t lessen, the 52-week low of 71,425 is a serious near-term risk. A significant relief rally could result from a diplomatic breakthrough in the Middle East that lowers oil prices, while further escalation or actual damage to undersea cables (a new concern that hit the Nifty IT index hard on Monday) could push the index to new lows. The market is currently feeling that the next major catalyst could come from either direction.
For its part, India’s economy is still fundamentally stronger than the current state of its stock market indicates. Morgan Stanley pointed out that despite the risks of stagflation brought on by tensions in West Asia, domestic demand still provides support. In the upcoming weeks, corporate earnings from TCS and Infosys will provide the next tangible indication of whether the business climate has declined as precipitously as prices. Until then, the Sensex is juggling a number of factors, including external shocks, a depreciating currency, and a global market that shows little regard for emerging markets.

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