Indian stocks fell sharply on Monday, 28 September, as rising crude oil prices and uncertainty over US-Iran peace negotiations deepened a selloff that has pushed benchmark indexes to six-month lows.

The BSE Sensex closed 1.52% lower at 72,771.72, losing 1,124.02 points, while the NSE Nifty 50 declined 1.56% to 22,780.25, shedding 360.25 points.

The decline reversed Friday’s modest recovery and extended pressure on Indian equities following seven consecutive weeks of losses, the longest weekly losing streak since 2020.

Oil prices rose after US President Donald Trump rejected an Iranian proposal to end the fighting and reopen the Strait of Hormuz.

Brent crude climbed more than 2% to around $106.70 a barrel during Monday’s session as investors assessed the prospect of prolonged disruptions to Middle East energy supplies. The Strait of Hormuz is a critical passage for global oil shipments, and uncertainty over its reopening has kept energy markets volatile.

For India, the world’s third-largest crude importer, sustained high oil prices threaten to increase the import bill, add to inflation and squeeze corporate profit margins.

The rupee also weakened, closing at 95.98 against the dollar, compared with 95.82 in the previous session.

Banking stocks lead the decline

Financial stocks were among the hardest hit as selling spread across public-sector and private-sector lenders. The Nifty Bank index fell 1.99% to 54,471.65, while the Nifty PSU Bank index dropped 3.24%, making it one of the weakest-performing sectors.

HDFC Bank, ICICI Bank, State Bank of India and other major lenders faced selling pressure as investors reduced exposure to equities amid rising global bond yields and uncertainty over interest-rate expectations.

Selling extended beyond financial stocks to automobile manufacturers, consumer goods companies, infrastructure businesses and energy stocks. The Nifty Midcap index declined 1.7%, while the Smallcap index lost around 1.8%, indicating that selling was not confined to the largest companies.

Among individual stocks, Jio Financial Services, Tata Motors Passenger Vehicles, Tata Consumer Products, Adani Enterprises and Adani Ports were among the notable losers.

The India VIX, which measures expectations of near-term market volatility, rose approximately 12.5%, reflecting increased investor caution.

Foreign selling compounds market pressure

Continued withdrawals by foreign portfolio investors have added to pressure on Indian equities. Foreign institutional investors sold shares worth ₹3,696 crore on Friday, 25 September. Foreign selling has persisted amid elevated US Treasury yields, geopolitical uncertainty and concerns about corporate earnings.

Higher US bond yields can make dollar-denominated assets more attractive relative to emerging-market equities, while a stronger dollar increases pressure on currencies such as the rupee.

Higher crude prices can widen the trade deficit, raise transportation and manufacturing costs and complicate the Reserve Bank of India’s efforts to manage inflation. The central bank has also been withdrawing excess liquidity from the banking system following substantial foreign-currency inflows.

The RBI scheduled another ₹25,000 crore government bond auction for 28 September, the final tranche of its planned ₹1 trillion open-market sale program. The operations are intended to absorb surplus banking-system liquidity, although they are separate from the immediate market reaction to oil prices and geopolitical developments.

The latest decline comes after a brief recovery on Friday, when the Sensex rose 315 points to 73,895.74 and the Nifty gained 77 points to 23,140.50. That rebound failed to reverse the broader decline, with both indexes remaining under pressure from foreign outflows and uncertainty over the direction of global interest rates.

Monday’s selloff pushed the Nifty below 22,800 and left the Sensex at 72,771.72, bringing both benchmarks closer to their recent lows. The direction of Indian equities will depend partly on developments in the Middle East, particularly whether Washington and Tehran can reach an agreement to restore shipping through the Strait of Hormuz.