India’s financial conditions remained under pressure in April as elevated crude oil prices, continued foreign investor outflows and a weakening rupee tightened stress across markets amid the ongoing Middle East conflict, according to a Crisil report.The Crisil Financial Conditions Index (FCI) stood at -1.2 in April compared with -1.4 in March. The report noted that “a negative FCI value, particularly one that falls outside the comfort band of one standard deviation, indicates financial conditions are significantly tighter than the long-period average”.The Middle East crisis continued to adversely impact foreign portfolio investor inflows, the rupee and government bond yields during the month, the report noted.“FPIs continued withdrawing from Indian markets, resulting in net outflows of $7.6 billion in April, driven by surging crude prices and apprehension stemming from the conflict,” Crisil said.The report added that hardening US bond yields also weakened sentiment toward Indian debt markets.Equity markets saw net outflows of $6.5 billion during April, while debt outflows rose to $1.2 billion. Although lower than March’s $13.6 billion total outflow, April’s FPI withdrawals remained significantly above the 12-month average outflow of $1.4 billion.The pressure from capital outflows and rising crude prices pushed the rupee to fresh record lows. Crisil said the rupee’s average value weakened to 93.6 per US dollar in April from 92.8 in March and crossed the 95-per-dollar mark for the first time by month-end.The report said RBI measures such as capping banks’ net open rupee positions helped “mitigate further rupee depreciation”.Government bond markets also witnessed pressure, with the 10-year benchmark G-sec yield rising sharply to an average of 6.96 per cent in April from 6.75 per cent in March.“The yield on the 10-year benchmark G-sec averaged 6.96% in April… driven by fiscal and inflation concerns stemming from the West Asia conflict, rising FPI outflows in the debt market and surging crude oil prices,” the report said.One of the biggest concerns highlighted by Crisil was crude oil. Brent crude averaged $120.4 per barrel in April — the highest monthly average in more than a decade — registering a 16.1 per cent increase over March.Crisil warned that financial conditions are likely to remain tight even if geopolitical tensions ease.“Even if the West Asia conflict ends there will be lingering effects and crude oil prices are expected to remain high for rest of the year,” the report said. It expects crude prices to average $90-95 per barrel during the current fiscal year.The report cautioned that persistently high oil prices could worsen India’s growth-inflation balance by impacting inflation, fiscal deficit, current account deficit and overall economic growth.“We expect retail inflation to rise to 5.1% this fiscal, compared with 2% last fiscal,” Crisil said, citing higher commodity prices and expectations of a below-normal monsoon.At the same time, the report projected GDP growth to slow to 6.6 per cent from 7.6 per cent last fiscal due to higher input costs, weaker global growth and elevated inflationary pressures.Despite the stress, Crisil identified some supportive domestic trends. Bank credit growth remained strong at 16 per cent in April, while systemic liquidity surplus touched a four-year high of Rs 5 lakh crore amid higher government spending and bond maturities.The report also noted that equity markets witnessed “mild gains” during the month as investor sentiment improved intermittently on expectations of de-escalation in geopolitical tensions and periodic softness in crude oil prices.