Indian Markets Flat Amid Geopolitical Tensions; Exports Hit Record

Indian equity benchmarks experienced a subdued trading week, with key gauges ending flat or marginally lower, primarily influenced by escalating geopolitical tensions between the United States and Iran. The BSE Sensex saw a modest rise of 64.42 points (0.09%) to 73,983.18 on Wednesday, while the CNX Nifty declined by 27.15 points (0.12%) to 23,214.95. On Thursday, the Sensex dropped 150.63 points (0.20%) to 73,832.55 and the Nifty fell 53.35 points (0.23%) to 23,161.60, as renewed hostilities in the Middle East unsettled investor sentiment and led to relentless foreign fund outflows.

Geopolitical Tensions Weigh on Investor Sentiment

Global market sentiment remained cautious throughout the week as renewed hostilities between the United States and Iran escalated, particularly after reports of a US helicopter gunship being downed near the Strait of Hormuz. This geopolitical uncertainty contributed to weak trends in global markets, with European indices like France’s CAC and Germany’s DAX trading lower. Asian markets also ended mostly down, led by South Korea’s Kospi, as regional inflation data underscored persistent price pressures. Foreign Institutional Investors (FIIs) significantly offloaded equities, with outflows of Rs 4,566.03 crore on Tuesday and an additional Rs 2,124.98 crore on Wednesday, further dampening domestic market mood.

India’s Export Surge and Healthcare Prowess

Despite the global headwinds, India demonstrated strong economic resilience, particularly in its export sector. Nitin Kumar Yadav, Additional Secretary at the Union Ministry of Commerce, announced that India’s total exports reached an all-time high of $863 billion in FY 2025-26, a substantial increase from $468 billion in FY 2014-15, reflecting a compound annual growth rate (CAGR) of 5.7 percent. Merchandise exports rose to $442 billion, and services exports surged to $421 billion, registering a CAGR of 9.3 percent. Union Minister of Commerce and Industry Piyush Goyal highlighted India’s growing global influence in pharmaceuticals, stating the nation is well-positioned to serve the world as an innovator, manufacturer, and reliable supplier of affordable medicines.

Economic Outlook and Policy Measures

The Reserve Bank of India’s (RBI) recent measures to attract foreign capital are projected to bring in $55-65 billion of inflows in FY27, according to SBI research in its latest Ecowrap report. These measures are expected to help stabilize the rupee and turn the country’s balance of payments into a surplus. While the Indian economy faces challenges from rising fuel and fertilizer import bills due to the West Asia crisis, GDP growth momentum remains intact with domestic consumption holding up. However, BMI, a Fitch group company, forecasted India’s GDP growth to slow to 6.6 percent in the current fiscal from 7.7 percent in FY26, citing weaker investments, consumption growth, and trade shocks.

Strategic Trade Engagements and FDI Trends

India has actively pursued and concluded several landmark trade agreements to strengthen its position in global value chains. The India-EFTA Trade and Economic Partnership Agreement (TEPA, 2025), backed by an FDI commitment of $100 billion, provides duty-free access for approximately 98 percent of India’s exports. Furthermore, the India-EU Free Trade Agreement (FTA, 2026), covering 27 high-income economies, is expected to support exports worth Rs 3.2 lakh crore. External Affairs Minister S. Jaishankar also held talks with Bulgaria’s leadership, exploring expanded bilateral cooperation in trade, investment, defence, semiconductors, and artificial intelligence.

India’s total outward foreign direct investment (FDI) commitments experienced a sequential decline, falling by 49.02 percent month-on-month to $4.49 billion in May 2026 from $8.84 billion in April 2026. This reduction was observed across overseas equity investments, loans, and guarantees. However, total financial commitments by Indian entities overseas increased 34.6 percent year-on-year in May 2026, compared to May 2025. Major overseas equity investments during May included Indovida India ($673.2 million), Tata International ($130 million), Arvind Advanced Materials ($58 million), and ONGC Videsh Rovuma ($31.1 million).

The BSE Sensex saw FMCG as the lone gaining sectoral index, while Telecom, Metal, Oil & Gas, Realty, and Energy were among the top losers. On the Nifty, Nestle, Hindustan Unilever, Axis Bank, Kotak Mahindra Bank, and ICICI Bank were top gainers, whereas Hindalco, Coal India, ONGC, and SBI Life Insurance Company were among the top losers.