The benchmark equity indices fell sharply on Friday, with the Sensex and Nifty declining nearly 1 percent, tracking weak global cues and a spike in crude oil prices following Israel’s strikes on Iran.
Falling for the second day in a row, the Sensex dived 573.38 points or 0.7 percent to settle at 81,118.60. During the morning trade, it tanked 1,337.39 points or 1.63 percent to 80,354.59. The Nifty dropped 169.60 points or 0.68 percent to 24,718.60.
Kotak Mahindra Bank, Power Grid, Adani Ports, Tata Motors, UltraTech Cement and Asian Paints were among the major laggards in early deals.
Key factors behind market fall:
1) Middle East tensions: Israeli strikes on Iran early Friday targeted nuclear-linked facilities, escalating fears of a broader conflict in the region. The attacks, among the most significant Iran has faced in decades, hit multiple sites including a main nuclear enrichment facility. Iran’s Supreme Leader Ayatollah Ali Khamenei warned of “severe punishment” against Israel, raising the threat of further retaliation.
"The Nifty fell over a per cent yesterday, as geopolitical tensions in the Middle East showed signs of erupting. As of this morning, Israel has launched pre-emptive strikes on Iran and that's led to a broad-based risk-off across markets," Akshay Chinchalkar, Head of Research, Axis Securities, said.
2) Weak global cues: Asian markets, including South Korea’s Kospi, Japan’s Nikkei 225, Shanghai’s SSE Composite and Hong Kong’s Hang Seng, traded lower. Wall Street futures were also down over 1 percent around 10:15 AM IST, reflecting rising investor nervousness.
3) Surge in crude oil prices: Brent crude jumped 9.33 percent to USD 75.83 a barrel after reports of Israel’s strikes. The development sparked fears of supply disruptions from the oil-rich Middle East. With India importing more than 85 percent of its oil requirements, the sharp rise in crude prices poses risks to the trade deficit and could pressure the rupee further.
"The economic consequences of this Israeli strike can be profound if the attack and counter attack by Iran lingers long. Brent crude prices have flared up by around 12% to $78. The impact on market will depend on how long the conflict lingers. In the near-term the market will be in a risk-off mode," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.
4) FII selling: Foreign Institutional Investors offloaded shares worth Rs 3,831.42 crore on Thursday, adding to the market’s downward pressure.
5) Rupee weakness: The rupee fell 56 paise to 86.08 against the US dollar in early trade on Friday, weighed down by stronger dollar demand, rising crude prices, weak domestic equities and persistent foreign fund outflows.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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