Sensex & Nifty Crash on West Asia Fears Before Rebound, RBI Injects ₹25,000 Crore, and SEBI Shifts FPI Fees to Rupee

Indian financial markets experienced a highly volatile session as escalating geopolitical tensions in West Asia sent shockwaves through global equities and energy markets on Wednesday, July 8, before prompting a partial bargain-hunting rebound on Thursday, July 9. Amidst this volatility, the Reserve Bank of India stepped in with a ₹25,000 crore liquidity injection via Variable Rate Repo auctions to stabilize short-term money markets. Meanwhile, the Securities and Exchange Board of India overhauled its FPI registration fees by switching to a rupee-denominated structure, as the Indian Rupee hovered under pressure near 95.75 against the US Dollar.

📊 Sensex and Nifty Plunge on West Asia Geopolitical Fears Before Staging a Partial Rebound

Indian equity markets experienced a volatile roller-coaster ride over the past 48 hours. On Wednesday, July 8, 2026, the market suffered a major sell-off, marking its steepest single-session decline in several weeks. The BSE Sensex tumbled 1,677.12 points, or 2.15%, to close at 76,503.60, while the NSE Nifty 50 slumped 516.65 points, or 2.12%, to settle at 23,882.05. The primary driver of this sell-off was escalating geopolitical tensions in West Asia after stalled diplomatic talks between the US and Iran, leading to confirmed military strikes. This spurred a spike in the India VIX index, which soared over 26%, reflecting mounting investor fear.

However, on Thursday, July 9, 2026, indices staged a partial recovery in early trade, showing resilience and bargain-hunting in blue-chip stocks. The BSE Sensex rallied between 450 and 495 points during early trading to touch a high near 76,900, while the Nifty 50 rebounded by over 130 to 148 points, crossing back above the psychological 24,000 threshold to trade near 24,020. Market sentiment, however, remains cautious as Brent crude oil prices have surged to around $79 per barrel, raising inflation and fiscal deficit concerns for India, which imports over 80% of its oil. FIIs and DIIs have shown mixed participation during this volatility, with bargain buying helping support the early Thursday rebound.

🏦 RBI Manages Banking Liquidity with ₹25,000 Crore Variable Rate Repo Auction

The Reserve Bank of India (RBI) continues to actively manage banking system liquidity to align short-term interest rates with its policy target. On Wednesday, July 8, 2026, the central bank conducted an overnight Variable Rate Repo (VRR) auction for a notified amount of ₹25,000 crore, with the funds scheduled to revert on July 9. The VRR auction is part of the RBI's efforts to inject short-term funds back into the system to address localized liquidity deficits, particularly after a net liquidity withdrawal of ₹74,181.18 crore was recorded from the money markets in the previous segment.

Furthermore, treasury participants are focused on the RBI's upcoming primary debt issuance. The central bank is scheduled to conduct a major auction of Government of India Securities (G-Secs) worth ₹32,000 crore on Friday, July 10, 2026, with the settlement planned for July 13. The auction includes a re-issue of the 6.36% GS 2031 bond and the long-term 7.71% GS 2066 paper. These regular issuances are crucial for the government to manage its borrowing programme while helping the RBI shape the sovereign yield curve.

💵 SEBI Restructures FPI Fees to Rupee and Rupee Weakens to 95.75 per USD

In a significant regulatory move aimed at simplifying the currency compliance burden for foreign investors, the Securities and Exchange Board of India (SEBI) announced a restructuring of registration fees for Foreign Portfolio Investors (FPIs). SEBI has replaced the traditional US dollar-denominated fee structure with a standardized rupee-based fee system. This change has been integrated into the updated Common Application Form (CAF) used by FPIs. By denominating fees in Indian Rupees, SEBI aims to streamline administrative procedures and align local regulatory payments with domestic currency transactions, encouraging foreign institutional participation.

On the currency front, the Indian Rupee (INR) faced renewed pressure against the US Dollar (USD), trading in the 95.57 to 95.75 range on July 9, 2026, compared to the 95.16 to 95.56 range on July 8. The weakening rupee was largely a reaction to the surge in global Brent crude oil prices and the sudden risk-off sentiment in regional equity markets. With oil prices flirting with $79 per barrel, increased demand for dollars from domestic oil marketing companies (OMCs) has weighed on the rupee. Market experts believe the Reserve Bank of India will continue to manage the currency's depreciation through tactical dollar sales, preventing sharp, disruptive movements while maintaining a competitive exchange rate.

📌 The Bottom Line

• equities-geopolitical-selloff-rebound: The Nifty 50 plunged 2.12% to 23,882.05 on geopolitical shock before reclaiming the 24,000 mark on Thursday, supported by early bargain-buying.
• rbi-liquidity-management: The RBI conducted a ₹25,000 crore overnight VRR auction to ease short-term funding costs and scheduled a ₹32,000 crore G-Sec auction for July 10.
• sebi-fpi-rupee-fees: SEBI replaced USD registration fees for FPIs with a rupee-based system as the domestic currency fell to 95.75/USD amid oil price spikes.