Kolkata, 29 May 2026
Dalal Street ended May on a sour note as benchmark indices cracked in the final hour of trade, spooked by fresh uncertainty over a US-Iran peace deal and heavy selling linked to MSCI’s May rejig. The Nifty 50 nosedived 359.40 points, or 1.50%, to close at 23,547.75, while the 30-share BSE Sensex plunged 1,092.05 points, or 1.44%, to settle at 74,775.74. The selloff erased over ₹3.5 lakh crore of investor wealth and pushed both indices to monthly losses of 1.9% and 2.8% respectively.
The Anatomy Of The Crash: From Green Open To Red Close
Morning Calm, Afternoon Storm
Both indices started Thursday on a firm footing. Nifty opened at 23,902.15 and hit an intraday high of 24,002.80, while Sensex touched 76,220.02 in early trade. But the gains evaporated by noon. A sharp, vertical drop post 2:30 pm dragged Nifty to a low of 23,484.75 and Sensex to 74,589.11 before a minor pullback into the close.
MSCI Rejig: The 3:00 PM Spoiler
Losses swelled in the last half an hour as MSCI’s May index rejig came into effect. India’s weight in the MSCI Emerging Markets index is set to fall to 11.2% after the rebalancing, down from nearly 20% in July 2024. The adjustment triggered heavy passive outflows, amplifying selling pressure. “We are unlikely to see a consistent rise in Indian stocks unless the uncertainty over US-Iran conflict is clearly behind us,” said Arun Malhotra, founder of CapGrow Capital.
Business News: Oil, IT, And Adani Fireworks
1. Oil Overhang: Brent Cools But Risk Remains
Brent crude futures fell 19% in May but are still 27.3% above pre-Iran war levels. India, which imports about 80% of its energy requirements, saw oil prices hovering near $92.6 for July futures on Friday as traders weighed US-Iran ceasefire reports.
2. Sector Scorecard: Financials, IT Bleed; Smallcaps Outrun
Ten of 16 major sectors logged monthly losses. Heavyweights Nifty Financial Services and Nifty IT shed 1.2% and 0.9% on Friday, while Reliance Industries lost 7.7% in May. ONGC plunged 11.4% on profit booking and project delay worries, and ITC slipped 8.9% after analysts flagged cigarette volume risks from price hikes.
Broader markets showed resilience. Nifty Smallcap 100 and Midcap 100 rose 0.7% and 3.2% in May on earnings optimism. Adani Enterprises was the outlier, soaring 22% in May after the US dropped fraud charges against Gautam Adani.
3. FII Exodus: India Loses AI Edge, $23 Billion Walks Out
Foreign investors have pulled more than $23 billion from Indian shares so far in 2026, surpassing last year’s record outflows. “Elevated oil prices and lack of AI trade have kept Indian market out of favour,” analysts noted. India’s market trades at more than 20 times earnings, above most major European and emerging markets, but offers one of the world’s lowest dividend yields.
Geopolitical Pulse: Strait Of Hormuz Holds The Key
1. US-Iran Deal: ‘Close, But Not There Yet’
The rupee opened at 95.90-95.95, slightly weaker than Wednesday’s 95.69 close, as traders tracked US-Iran ceasefire chatter. Oil fell 1.1% on reports of a potential deal, but VP JD Vance said the nations were “close” but “not there yet”. The Trump administration has several times said a deal to end the fighting was close, only to have Iran dispute or downplay the claims.
2. Trade & Inflation: Rupee On The Ropes
The rupee has declined about 5% since the war in Iran began in late February and was on course for a near 1% month-on-month decline. Wagers against the Indian rupee stayed elevated, underscoring caution toward Asia’s net oil importers.
3. Index Outlook: Polls See First Yearly Drop Since 2015
Indian stocks are set for their first annual decline in more than a decade, with the Nifty 50 forecast to fall about 0.5% for 2026. The median forecasts for both indices were sharply downgraded from a February poll, conducted before the US-Israel war with Iran began.
What Next: Stock-Pickers’ Market In June?
With foreign shorts elevated and crude still volatile, volatility is likely to stay high. Broader markets are outperforming on earnings optimism, while heavyweight financials and IT face pressure. Until the Strait of Hormuz reopens and oil stabilises, D-Street will trade headline to headline.
Bottomline for investors: Defensive staples, select midcaps and green-energy plays look safer than index bets. As geopolitical uncertainty lingers, May’s bruises are proof that macros will trump valuations in the near term.
