The Indian equity markets started the day on a downward trend due to weak global cues and aggressive FII short positions in index futures, influenced by rising geopolitical tensions in the Middle East. As of 9:28 am, the Sensex dropped by 1,773 points (2.21%) to 78,465, while the Nifty fell by 549 points (2.21%) to 24,316. Broad-cap indices mirrored this decline, with the Nifty Midcap 100 down by 2.18% and the Nifty Smallcap 100 by 2.17%.
In the market, all sectoral indices were in the red except for Nifty IT, which saw a slight increase of 0.27%. Nifty metal and realty sectors experienced the most significant losses, declining by 3.18% and 3.04% respectively, while Nifty auto and oil and gas sectors dropped by 2.97% and 2.86% respectively.
The escalating tensions involving the United States, Israel, and Iran are putting pressure on India’s current account, inflation outlook, and currency stability. Devarsh Vakil, Head of Prime Research at HDFC Securities, highlighted that elevated crude prices could lead to increased import bills, wider current account deficits, rupee depreciation, inflationary pressures, and foreign capital outflows.
Amidst the geopolitical uncertainties, WTI crude surpassed $75 a barrel, with Brent trading near $81 a barrel due to the ongoing Middle East conflict and disruptions in the Strait of Hormuz, which are heightening supply risks. Analysts noted a general weakening of major global indices, reflecting a shift towards risk aversion as concerns over conflicts deepen and crude oil prices surge.
Looking ahead, sectors such as defence, airlines, tourism, chemicals, and oil-related stocks are expected to attract attention as they are directly impacted by rising crude prices and disruptions caused by conflicts. Market participants emphasized the need for caution, especially for options traders, given the elevated volatility, with India VIX standing at 17.13.
In Asian markets, various indices experienced declines, with China’s Shanghai and Shenzhen indices dropping, Japan’s Nikkei declining significantly, and South Korea’s Kospi witnessing a substantial loss. South Korea’s Kospi faced a severe plunge, prompting a temporary trading halt, while the Kosdaq also activated a circuit breaker following a sharp decline.
The US markets closed in the red, with the Nasdaq, S&P 500, and Dow Jones all registering losses, reflecting the broader trend of negative sentiment in global markets.
