NEW DELHI: Domestic equity market reeled under pressure on Monday on fears of rising oil prices as violence escalated between Israel and Palestine in the Middle Eastern region.
Market participants fear that a rise in oil prices will not only push India’s inflation rate higher but might also prompt the RBI to keep the interest rate at a higher level.
This will negatively impact the Indian market as the hawkish stance maintained by the US Federal Reserve recently led to a substantial pullout by foreign institution investors (FIIs) from equities to safer avenues such as government bonds and gold.
The BSE Sensex fell over 500 points to touch a low of 65,435 while the broader NSE Nifty50 fell more than 150 points to hit an intraday low of 19,480.
At the day’s close, Sensex was down 483 points at 65,512 while Nifty shed 141 points to end at 19,512.
Investors lost nearly Rs 4 lakh crore on Monday as the market capitalisation of all BSE-listed firms came down to Rs 316 lakh crore from Rs 319.9 lakh crore. Broader markets underperformed benchmark indices as the BSE midcap index dropped over a per cent, while the BSE smallcap index shed about 2%.
Shrikant Chouhan, Head of Research (Retail), Kotak Securities, said that Investors dumped equity assets as they turned risk off on concerns that a faceoff between Israel and Hamas could further deteriorate the global economy already reeling under higher interest rates and stubbornly high inflation.
“There are concerns that since most of the oil producing nations are close to the conflict zone, a prolonged war could trigger an upsurge in international crude oil prices. With a fresh surge in crude oil prices, higher oil import bill going ahead would stoke domestic inflation and prompt the central bank to take a hawkish stance."
"With investors preferring gold and dollar assets in times of uncertainty, local stocks across the board came under severe hammering even as indices in the Asian region ended mixed,” added Chouhan.
Global oil benchmark Brent crude surged by more than 3% to $87.39 a barrel on Monday. Foreign Institutional Investors (FIIs) offloaded equities worth `998 crore on Monday, according to NSE data.