India Markets Under Pressure: Oil, FPI Sell-Off & Rupee Fall

Research Desk21 March 20266 min read

Rupee weakens, oil spikes, and FPIs sell heavily. Key macro trends shaping India markets amid global uncertainty and Middle East tensions

Weekly Capsule (Mar 16 – Mar 20) and Impact Analysis

News Announcement	Impact Analysis
India core sector growth for Feb-26 fell sharply to the level of 2.27%	This is sharply lower than the upgraded 4.72% core sector growth in Jan-26, largely due to pressure on energy sector Steel and cement continued to show robust growth, but the pressure on energy could increase further in March 2026
Fed Statement holds status quo on rates, hints at war-related uncertainty	Barring Stephen Miran, all the other members of the FOMC voted for a status quo on rates in the 18-March Fed meeting The dot plot chart of members is pegging one more rate cut in 2026, and possibly, another rate cut of 25 bps in 2027
Fed quarterly projections expects GDP growth to improve by 10-30 bps	However, while GDP was upgraded, the Fed is also pegging higher headline inflation, led by a surge in core inflation The job situation is seen as stable till 2028 and the Fed rate outlook has also not changed in the last two quarters
HDFC Bank chair, Atanu Chakraborty, resigned in a rather abrupt manner	He stated in his letter that recent developments at the bank were not in sync with his own ethics and internal values While his differences with Jagadeesan are well known, the move shocked markets as the stock fell to a new 52-week low
The oil supply situation in the Middle East and West Asia worsened this week	Massive oil and gas cargoes continue to be held up at Straits of Hormuz due to the threats issued by Iran to shipments Constant attacks by Iran have also forced Middle East oil and gas facilities to be shut down as a precautionary move
FPIs sold Indian equities worth $5.71 billion in the first half of March 2026	The selling by FPIs was most prominent in the BFSI sector, which alone accounted for 60% of the FPI selling in March Apart from oil concerns, the sell-off by FPIs was triggered by a strategic shift to semiconductor stocks in Taiwan and Korea
Brent crude touched a high of $118/bbl during the week, closing around $110	While Iranian oil shipments have helped manage the supply shock, the geopolitical risk continues to weigh on oil For India, while supplies are being managed, the cost pressure is likely to add nearly 70-100 bps to the headline inflation
The Indian Rupee weakened sharply to close the week at nearly ₹93.67/$	Apart from the pressure of FPI selling and oil prices, the rupee was also hit by heavy selling by traders in the NDF market Amidst the crisis, RBI intervention has been limited; although it has built up a net short position of $100 billion on the dollar
Reliance has appointed 17 investment bankers for its proposed Jio IPO	The Jio valuation is pegged at $180 billion, so even a 2.5% dilution should be worth at least ₹42,000 crore That would not only test the appetite of Indian IPO markets, but it will be the largest IPO in the history of Indian markets
IDBI Bank divestment may be off the government agenda for the time being	While neither the government, nor LIC have stated as much, it is clear that both were unhappy with the bids received It now looks like the IDBI divestment may have to wait and its contribution to divestment revenues will not happen in FY26
India WPI inflation for February 2026 rises to a 11-month high of 2.13%	The spike in WPI inflation was driven by a spike in food prices as well as a spike in manufacturing inflation for the month Fuel inflation is still in the negative, but with crude moving up to $110/bbl, that could entirely change in March numbers
Supply chain constraints hit imports and softened trade deficit for Feb-26	Merchandise trade deficit at $27.1 billion for February, was sharply lower than the $34.7 billion deficit in January 2026 India’s current account deficit (CAD) for first 9 months of FY26 stood at 1.0% of GDP; a fairly comfortable scenario
India 10-year bond yields touched a high of 6.77% during the week	The spike in bond yields was triggered by a sharp spike in crude oil prices, which is likely to impact inflation and yields There was some late buying by the RBI in benchmark bonds, which led to the yields tapering back to 6.74% for the day
GMDC stock surges amid the sell-off on the back of rare earth magnet scheme	The government has already announced an incentive scheme of ₹7,280 crore for domestic rare earth magnets production The scheme is intended to better manage the supply chain of rare earth magnets, which is currently dominated by China
Even as Hormuz traffic falls sharply, India gets Saudi oil from Red Sea	Saudi Arabia has re-routed nearly 16 million barrels of crude oil to India from its Red Sea port, bypassing Strait of Hormuz Even Apple is adjusting to its chip flows via Dubai, hinting that companies are adapting rapidly to supply chain disruptions
Global PE fund, L Catterton remains bullish on India, despite West Asia war	Catterton has already deployed $440 million in India and another dedicated fund of $400 million is on the way Catterton, led by former HUL CEO Sanjiv Mehta, continues to be positive on the broader India consumption story
Gold corrected 7% during the week, marking its worst week in 6 years	Spot gold fell to $4,660/oz, and one must remember that just over a month back, gold had peaked at around $5,500/oz With rising inflation and reduced chances of further rate cuts, the opportunity cost of holding gold is likely to move higher
NCLT approved the Adani bid for Jaiprakash Associates at ₹14,535 crore	This was lower than the Vedanta bid, but the COC preferred this bid as there was more upfront cash payment here The acquisition deal gives Adani group control over the real estate, cement, power, and hospitality assets of JP group
Muthoot Fincorp is planning a $300 million IPO amidst volatile markets	Muthoot Fincorp is also into the gold loan business, although it is from a different part of the Muthoot family tree The IPO of Muthoot Fincorp is expected to be a combination of a fresh issue and an offer for sale (OFS) by early investors
Heads have started rolling as HDFC Bank sacks 3 of its senior executives	Sampath Kumar, Harsh Gupta, and Payal Mandhyan have been asked to go for mis-selling AT-1 bonds to investors This move assumes significance as it comes just a couple of days after HDFC Bank chairman, Atanu Chakraborty, resigned
The persistent spike in crude oil prices is starting to show on market prices	OMCs have hiked the prices of premium petrol by up to ₹2.30 per litre to compensate for the higher crude prices At the same time, IOCL had also increased the prices of industrial fuel by 25%, to put off impact on retail consumers

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