India’s stock market fell on Friday, in line with a global decline as escalating military conflicts with the United States, Israel and Iran jolted energy markets and sapped investors’ appetite for risk.
The benchmark BSE Sensex fell 0.45% to 79,658.99 in early Mumbai trade, slipping past the psychologically important 80,000 level. A similar decline was seen in the Nifty 50 index, which fell 0.44% to 24,656.4. The selling was broad-based, with 13 of the 16 major sectoral indices declining.
geopolitical contagion
The primary catalyst for decline is the escalating Iran war. Following the United States’ direct involvement with Israel against Iranian targets, global markets are bracing for a protracted conflict. The heightened tensions have revived fears of a 1970s-style energy supply shock.
International benchmark Brent crude rose nearly 5% on Thursday to a 20-month high of $86.28 a barrel. India is threatened by persistently high energy costs, which imports more than 80% of its oil requirements.
VK Vijayakumar, chief investment strategist at Geojit Investments Ltd, said, “Crude oil prices will continue to influence the market in the near term. As long as Brent crude remains at the level of $ 85, the market is unlikely to be affected.”
Financial situation leads to withdrawal
Financial stocks, which have the largest weightage in domestic indices, bore the brunt of selling pressure. The Nifty bank index declined 0.7%, dragged down by HDFC Bank Ltd. and ICICI Bank Ltd., down 1.1% and 1.4%, respectively, as investors reassessed the credit growth and margin outlook amid rising global yields and a stronger U.S. dollar.
The risk-off sentiment extended to the broader market, although mid-cap and small-cap shares showed slightly more resilience, falling 0.2% and 0.1% respectively.
global context
The weakness in Mumbai reflects the gloomy mood across Asian trading centres. MSCI’s broadest index of Asia-Pacific shares fell after a negative close on Wall Street. The US dollar hit multi-month high against other currencies as traders sought safety in the greenback, further complicating the outlook for the Indian rupee.
As the conflict deepens, global development prospects are becoming increasingly cloudy. For India, the trajectory of the Nifty 50 in the coming sessions will likely depend on the sustainability of “Gift Nifty” levels and whether crude oil prices find a new floor or continue to move towards $90.
