Benchmark indices Sensex and Nifty ended Friday in the red as investors turned cautious amid a fresh record fall in the rupee against the US dollar, rising oil prices and a sharp decline in global markets. During the week, the Sensex dropped nearly 2,000 points, while the Nifty 50 declined by about 2%. Here are five key factors likely to influence market sentiment from Monday:
Iran tensions continue
Iran’s Foreign Minister Abbas Araqchi said on Friday that Tehran does not trust the United States and would enter talks only if Washington showed genuine intent. He said Iran remained open to both diplomacy and renewed conflict if needed. Meanwhile, Donald Trump stated that he was running out of patience with Iran and said, after talks with Chinese President Xi Jinping, that Iran must not be allowed to develop nuclear weapons and should reopen the strait.
Oil prices climb
Oil prices jumped as much as 8% during the week and ended Friday more than 3% higher. Rising tensions between Washington and Tehran increased concerns despite the ceasefire remaining in place. Hopes for a quick reopening of the Strait of Hormuz have also weakened.
Morgan Stanley analysts said the oil market is in a “race against time”, warning that crude prices could rise further if the Strait of Hormuz remains closed into June. Saudi Aramco CEO Amin Nasser also warned that disruptions in the route could delay stability in oil markets until 2027 and affect around 100 million barrels of oil supply each week.
Rupee falls to a record low
The Indian rupee continues to weaken, with concerns growing over whether it could move closer to the Rs 100 per dollar level. Attention has now shifted to how such a fall could affect the economy, company earnings and investments. The rupee slipped below the 96 mark on Friday due to higher crude prices, a stronger dollar and hawkish remarks from US policymakers. Traders said foreign fund outflows and weak foreign direct investment inflows were also adding pressure.
Over the past year, the rupee has weakened against all major global currencies, with its biggest decline not even against the dollar.
Global market signals
Global markets remained under pressure last week. South Korea’s Kospi index fell 6% on the same day it had touched a record high, mainly due to heavy selling in technology stocks and broader weakness across Asia-Pacific markets.
US markets also ended sharply lower on Friday after talks between Donald Trump and Xi Jinping failed to produce major policy outcomes. Technology shares led the decline as investors booked profits. Intel fell over 6%, AMD and Micron dropped more than 5%, while Nvidia lost 4.4%.
Rising US bond yields
Higher US bond yields generally create pressure on Indian markets because investors often move funds from emerging markets to safer US assets. This can lead to foreign investors pulling money out of Indian equities, affecting both stocks and the rupee.
Higher yields also strengthen the dollar, raise borrowing costs and reduce market liquidity. Sectors such as IT and banking, which are sensitive to interest rates, may face greater pressure.
Markets are expected to remain volatile in the coming week, with sentiment likely to depend heavily on developments in the US-Iran situation, diplomatic efforts and movements in global oil prices. Investors remain cautious as they balance hopes for a diplomatic solution against fears of prolonged geopolitical tensions and energy market disruptions.
