Morgan Stanley has downgraded Indian stocks to equal-weight relative to Asia and emerging markets, citing macro uncertainty and India's vulnerability to oil supply risks. Global funds have pulled $1.3 billion from local stocks in just two sessions amid the Middle East conflict, sending the regional gauge toward its worst week in six years.

Indian shares found temporary support at the Nifty's 100-week moving average, which has consistently acted as a long-term floor during stress. The only decisive break below it came during the 2020 pandemic meltdown. Pricey valuations remain a hurdle, with Kotak Institutional Equities favoring Nifty 50 members but remaining wary of mid- and small-caps.

Despite the broader downturn, Reliance Industries may benefit from higher refining margins as Middle East conflict disrupts supply lines. The Reserve Bank of India is also supporting the market, buying bonds worth 695 billion rupees ($7.6 billion) to shield the economy from rising oil prices and potential inflationary pressures.