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It was bound to happen. The day before night, when it was daytime in the US, the American stock markets fell, and the indices were down. Taking cues from there, as the Indian equities have done over the past 2-3 weeks, and so have some of the Asian markets, the Sensex, or the Bombay Stock Exchange Index, was down by nearly 1,000 points yesterday. April seemed like a lucky month for the index, which crept up rapidly from below 72,000 on March 30 to over 79,000 on April 21. But since then, the Sensex lost 2,600 points. Over the past one year, the difference between the 52-week high and low is an unbelievable more than 14,500 points. Who would have imagined, as late as January, when the index was almost 86,000, that it would be down in the dumps, or seemingly so? The road to 1,07,000 points by the end of 2026, or a massive hike of 40 per cent from the present, as predicted by a leading brokerage house, seems unreachable, with the top covered in blinding storm. But who knows, Indian indices, markets, and equities have performed amazing and blinding miracles in the past.

Of course, the war is a factor, and so are the crude oil prices. The second round of talks failed, or did not take place, and as the US offered to extend the temporary ceasefire, Iran captured a few ships in the Strait of Hormuz, and America did the same with Iranian ships around Kharg Island. The war-like feeling escalated, which triggered bearish sentiments. Well, in some senses, it was not because the conflict continued. It was because the investors, and others expected peace. Expectations clashed with realities. The moment the shipping disruptions became headlines, crude oil reacted, and jumped several dollars to reach USD 106 per barrel, from below USD 100. A few brokerage houses claimed that USD 100 was the new normal, and USD 95 was the lowest benchmark that oil would touch, before shooting up, unless peace prevails. In addition, crude will continue to hover USD 10-20 over the pre-war prices in the post-conflict period, which may extend for months or even years. Hence, the end of the war may not signify the end of energy challenges for the consumers, although the producers are likely to make a killing on Brent.

Despite the restrictions and strictures, some of which seemed like ones followed by closed, socialist economies, the Indian central bank was unable to control or support the rupee. After breaching Rs 95 to a dollar, the currency did strengthen to Rs 92-plus, but later weakened to breach Rs 94. The earlier Rs 95 benchmark is on the horizon. This happened immediately as some of the restrictions were eased. This indicates that traders and speculators expect the currency to reach Rs 100 to a dollar by the end of this year, if not earlier. The central bank will try to prevent this, with more restrictions later, if required, and hope that once the Iran war ends, the pressures on the rupee will ease, especially in terms of higher crude prices, lower exports, expensive imports, lower GDP growth, and lower foreign exchange outgo. Everything rides on the war, and slippery and slick oily roads. The currency is unlikely to be stable in the midst of these fluctuating fortunes on both sides of the conflict. If the war does not stop, its trajectory is downward, or towards weaker entropy.

Foreign investors remain sellers in Indian equities, as they possibly do in other Asian markets, and those in the emerging economies. Last Thursday, they sold shares worth more than Rs 3,000 crore. Domestic investors are trying to take them on. But they face an uphill task under the shadows of the war. Data indicates that retail investors shied away from the markets in March, as is evident from the number of SIP accounts that were either not renewed or lapsed, compared to the new ones. Some experts feel that the institutions, which believe in regularly buying on the lows, and constantly selling on the highs, may be pushing more Indian money into the markets. This explains why the indices rebound with zest and ferocity, even as the whiff of good news reaches the markets. The net equity outflows by foreign investors, higher trade deficit, and outflows via other mechanisms, push the rupee down, and it does the same with equities despite the support from domestic investors. It is a never-ending game, which will stop when the war does.

As mentioned earlier, the Indian and Asian markets take their cues largely from the American ones. “KOSPI in South Korea fell by about one per cent, while Japan’s Nikkei 225 advanced roughly 0.4 per cent. In China, the Shanghai Composite Index declined 0.6 per cent, and Hong Kong’s Hang Seng Index also traded lower, though losses remained modest. Overnight, the Nasdaq Composite led the decline on Wall Street, ending nearly 0.9 per cent lower. Futures tied to the Dow Jones Industrial Average were also in negative territory, suggesting a cautious start for US markets later in the day,” stated a media report. Bond yields in the US were up due to fresh war concerns.