The stars were aligned perfectly on Thursday for benchmark indices to touch fresh record highs but overnight news about US killing a top Iranian commander in an airstrike in Iraq flared geopolitical concerns which could weigh on equity markets.
Indian market could remain under pressure if the tensions escalate between the US and Iraq, says Rusmik Oza, Sr. VP (Head of Fundamental Research-PCG), Kotak Securities Ltd in a special podcast with Moneycontrol.
Iran vowed harsh revenge after the United States killed Iranian Major-General Qassem Soleimani, head of the elite Quds Force and architect of Iran’s spreading military influence in the Middle East, in an airstrike said a Reuters report.
“The geopolitical concerns which have emerged are severe because Iran would retaliate which could spook the market further, especially the Crude. It could have little longer implication,” he said.
He further added that considering the fact that the market was trading with high valuations, and everyone was too optimistic about the Budget 2020 – this (geopolitical concerns) lead to a knee-jerk reaction. The negative sentiment on the Street could remain for 1-2 weeks.
A mild correction in the market is possible that will be led by heavyweights which rallied in the past. But, overall the market structure is still sound and the event does not change the theme of global liquidity which will still remain abundant.
Investors would have to wait for record highs. Oza is of the view that if the geopolitical concerns escalate then the market could take a breather if not, the record highs are possible ahead of the Budget.
Impact on crude oil:
The crude oil is likely to head towards $70-75/bbl. We are in a comfortable zone as long as the crude oil prices are trading below the $75/bbl mark, said Oza.
However, the recent run-up is temporary and as and when things stabalise crude oil prices would also nomalise. So, yes, crude prices will spike but it would not be able to hold onto higher levels as long as we don’t have a war-like situation.
Tune in to the podcast for more.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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