After a bruising Monday that wiped out Rs 6.59 lakh crore of investor wealth, Dalal Street now faces a fresh overhang after US President Donald Trump indicated that the war with Iran could stretch for four to five weeks.

Indian markets were shut on Tuesday for Holi, leaving investors to react on Wednesday to Trump’s comments that the conflict “has always been a four-week process” and could continue for “four weeks or less”. He said he remained open to talks with Iran but did not indicate whether negotiations would happen soon.

On Monday, equity markets had already cracked under geopolitical pressure. The BSE Sensex plunged 2,743 points in early trade before trimming losses to end 1,048 points lower at 80,238, down 1.29%. The Nifty also fell sharply, closing near 24,850. The total market capitalisation of BSE-listed firms fell by Rs 6,59,978 crore.

Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, said the sell-off reflected a clear risk-off move. “Indian equities witnessed a sharp decline as escalating tensions in West Asia triggered a pronounced risk-off response. Markets reacted to US and Israeli strikes on Iran and subsequent regional retaliation, prompting a flight to safe-haven assets,” he said.

With Trump now signalling a potentially longer conflict, market participants will be watching crude oil and global cues closely when trading resumes.

Vinod Nair, Head of Research at Geojit Investments, said rising crude oil prices and a weakening rupee reflect concerns over potential disruptions to oil supply, which could increase inflationary pressures in India, impact fiscal balances and strain margins for energy- and chemical-dependent sectors.
He added that the India VIX has moved higher, signalling greater uncertainty and risk aversion, while foreign institutional investor selling has intensified following the spike in crude. Also Read | NFO Insight: Will TRUSTMF Mid Cap Fund’s GARV and LIM strategy help identify quality mid-cap opportunities?

Technically, analysts see the market in a weak but potentially oversold zone.

Shrikant Chouhan, Head of Equity Research at Kotak Securities, said the market is trading well below short- and medium-term averages and, on intraday charts, it is holding a weak formation, which is largely negative. However, he added that the market appears oversold and a technical bounce cannot be ruled out.

Analysts see 24,750 on the Nifty and 80,000 on the Sensex as key support levels. “As long as the market is trading above this, a pullback formation is likely to continue,” Chouhan said, adding that on the upside the Nifty could attempt a move towards 25,000-25,075. A break below 24,750, however, could push the index towards 24,650-24,500.

Gaurav Udani, Founder of Thincredblu Securities, sees immediate resistance around 25,100 on the Nifty, with support in the 24,550-24,600 range. “A sustained break below this support band could extend downside pressure, while reclaiming resistance is necessary for any short-term stabilisation,” he said. Given heightened geopolitical uncertainty, he advised traders to remain cautious and avoid leveraged positions.

The key variable for Wednesday’s trade will be oil. A sustained rise in crude could worsen inflation expectations, pressure the rupee and complicate the interest rate outlook. If crude stabilises or cools, markets may attempt a relief bounce from oversold levels.

Oil prices rose marginally on Tuesday as fighting between the United States, Israel and Iran intensified. US West Texas Intermediate crude rose more than 1% to around $70.59 a barrel by 11:48 GMT, extending gains from the previous session when prices had surged nearly 14%.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)