NEW DELHI: The impact of the tension between Iran and Israel could be seen across equity, debt, commodities and currency markets on Monday.
Domestic equity market fell sharply on Monday and made investors poorer by more than Rs 6 lakh crore as fresh tension escalated in the Middle East after the Israeli Army proposed retaliatory measures against Iran.
Uncertainty over interest rate cuts is also said to have led to profit booking.
Extending Friday’s fall, the BSE Sensex on Monday plummeted 845 points, or 1.14%, to settle at 73,400 levels, while the Nifty50 closed at 22,273, down 247 points or 1.1%. The market capitalization of all BSE-listed firms declined by Rs 6 lakh crore to Rs 393.77 lakh crore.
“Geopolitical tensions and inflationary headwinds in the Western world have led to pressure on equity markets worldwide. While India is relatively better placed, higher crude oil prices are a significant dampener,” said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.
Gold price rose Rs 300 to Rs 73,050 per 10 grams in the national capital on Monday in line with firm trends in the global markets. Silver prices also jumped Rs 500 to Rs 85,700 per kilogram.
Crude prices trended weak on Monday with Brent futures for June delivery dropping slightly to $90.21 a barrel and the West Texas Intermediate (WTI) futures for May delivery softening by 38 cents to $85.28. Market experts believe that if the geopolitical situation worsens, oil prices may go up around $100 per barrel level, a big concern for India and corporate earnings.
“A confrontation between Iran and Israel might drive up the price of oil to more than $100 per barrel and cause panic selling and volatility in the stock market. Potential for full-blown Crude oil prices are almost at six-month highs as a result of the Israel-Iran confrontation,” said Pravesh Gour, Senior Technical Analyst at Swastika Investmart.
Swarnendu Bhushan, Co - Head of Research at Prabhudas Lilladher said that Iran produces 3.2mnbopd of crude oil and also has significant control on the Strait of Hormuz which accounts for 30% of oil transit and 70% of oil shipment to Asia. “Any escalation that may impact the oil production of Iran or affect the oil transit through the Strait can result in a sharp spike in the oil prices. This would affect oil marketing companies negatively as they may not be able to take commensurate price hikes,” added Bhushan.