The raging war in West Asia continues to have a deleterious effect on the Indian financial markets, with the Rupee closing at a new all-time low, bond yields hardening and equities taking a beating.

The rupee closed at a new low of 94.8125 per US Dollar, down about 84 paise against the previous close of 93.9775, amid rising global energy prices, FPI-related outflows from domestic equity markets and a strengthening Dollar.

Yields of Government Securities (G-Secs) hardened due to fears of the fiscal implications of the Government’s move to reduce excise duty on petrol and diesel by ₹10 each.

Yield of the 10-year benchmark bond (6.48 per cent GS2035) closed at 6.94 per cent, up 6 basis points over the previous close of 6.88 per cent. The last time the 10-year G-Sec yield was at the 6.94 per cent level was in October 2024.

The equity markets are feeling the heat of the West Asia war due to the negative impact it will have on the economy and companies, even as FPIs continue to pull out. Amid worsening macro and slowing earnings growth, Goldman Sachs has lowered Indian equities to marketweight from overweight on less attractive risk/reward than North Asian markets.

Equity benchmarks BSE Sensex and NSE Nifty ended down 2.25 per cent (to close at 73,583 points) and 2.09 per cent (22,820 points), respectively.

Rupee vaults above 94

The rupee on Friday closed at 94.8125 per US Dollar, about 109 paise weaker against last Friday’s 93.72 close. Since the beginning of the West Asia war, the rupee has depreciated about 4 per cent.

YES Securities, in a report, noted that the Indian rupee fell to a record low, past 94 per dollar this week, pressured by energy supply concerns and foreign outflows.

“The rupee has dropped about 4 per cent since the war began, putting it on track for its first fiscal-year decline in over a decade. Rising energy costs are adding to inflation and growth concerns, keeping the near-term outlook weak,” per the report.

G-Secs yields rise

Impact of the Government’s move to reduce excise duty on petrol and diesel to shield consumers and oil marketing companies from the global oil shock has raised concerns that the Government may borrow more in FY27. G-Sec yields went up due to this.

India Ratings and Research (Ind-Ra) estimates suggest that if the excise duty remains at the current level throughout FY27, it would cost the government ₹1.70 lakh crore. Since the onset of the West Asia conflict, the Indian crude basket’s price has jumped to $117.09/barrel (bbl) in March 2026 (up to 25 March 2026) from $69.01/bbl in February 2026.

However, the retail prices of petrol (excluding premium variety) and diesel (excluding industrial diesel) have remained constant.

“Due to the constant retail prices, oil marketing companies incurred huge marketing losses, making the excise duty cut beneficial for their credit profile. Even after the excise duty cut, the retail prices of petrol and diesel are expected to remain the same as of 26 March 2026, complicating fiscal arithmetic for FY27,” said Devendra Pant, Chief Economist, Ind-Ra.

Equity markets down

With FPIs pulling out about $11.38 billion worth of investments from the Indian equity markets in March so far (up to March 27), the benchmark equity indices are sinking further.

Om Mehra, Technical Research Analyst, SAMCO Securities, said the Nifty ended the session at 22,819.60, declining 2.09 per cent, as it continued to remain under pressure and closed near the lower end of the day’s range.

He observed that the index has now extended its weakness, marking the fifth consecutive weekly decline, with a weekly fall of 1.28 per cent. Since the West Asia conflict broke out on February 28, Nifty is down by over 9 per cent.

Published on March 27, 2026