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India equity market volatility and forex reserve surge

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2026-09-13 05:05 UTC → 2026-09-13 06:34 UTC · added ~~removed~~

Indian equity markets continue to face volatility driven by rising crude oil prices and shifting U.S. monetary policy expectations. While the Sensex and Nifty have experienced intermittent periods of recovery, they remain highly sensitive to global cues, including U.S. jobs data and Middle East tensions affecting the Strait of Hormuz. Geopolitical instability intensified following weekend strikes between the U.S. and Iran, with Iran warning of “reciprocal retaliation” against attacks on its energy infrastructure. This pushed Brent crude toward the $97–$98 range, eventually crossing the $100 per barrel threshold. As Brent crude climbed further to approximately $108 per barrel, the Indian rupee faced sustained downward pressure. After crossing the ₹95 per US dollar threshold, the currency dropped 44 paise on Thursday to close at 95.52, before falling another 27 paise to 95.79 during early trade on Friday. Recent data shows the Indian rupee has faced its fifth consecutive session of decline, closing at 95.57 against the US dollar. On September 9, market pressures intensified as Brent crude surged above $108 per barrel, fueled by concerns over supply disruptions involving Houthi rebels and regional conflict. This spike, alongside U.S. 10-year bond yields approaching 5%, led to sharp declines in domestic indices. The BSE Sensex closed down 120.83 points (0.16%) at 74,781.76, while the Nifty 50 fell 79.70 points (0.34%) to 23,398.10. Consequently, the BSE market capitalization dropped from 483 lakh crore rupees to 478 lakh crore rupees. Despite this, India’s foreign exchange reserves have surged by a record $44.9 billion to reach $785.7 billion, making India the world’s fourth-largest holder of foreign exchange reserves, overtaking Russia. This growth was primarily driven by strong dollar inflows under the Reserve Bank of India’s (RBI) Foreign Currency Non-Resident (Bank) deposits scheme. More recently, the Nifty 50 has faced five consecutive weeks of decline.

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