Mid-Day Mood | Market rebounds from first shock of war in Middle East

IT and Healthcare indices swerve only sectors that were trading in green as rising dollar will support their revenue.

The market recovered to some extent from morning lows on October 9 but uncertainty remained on its future course amid a fallout from escalation in conflict between the Hamas and Israel. The geopolitical crisis also kept investors on their toes.

Geopolitical issues tend to give rise to risk aversion, analysts noted. Consequently, as part of a knee-jerk reaction, we have seen a hardening of bond yields in the US, spike in crude oil prices and surge in the Dollar Index – all of which are bad news for India.

“Going by the past experiences, the market usually absorbs the news flow and situation normalises in a few weeks. So, the short-term reaction to geopolitical issues turns out to be an opportunity in the hindsight,” said Gaurav Dua, SVP - Head of Capital Market at Sharekhan.

The Sensex, which dropped about 560 points in the morning recovered as low-level buying ensued. It traded at 65,731.49, down 273 points, or 0.41 percent, as of 11am. The Nifty 50 was trading at 19,441.85, down 0.44 percent, or 87 points.

IT and Healthcare indices swerved only sectors that were trading in green as rising dollar will support their revenue. PSU banks and metals were under heavy selling pressure.

Perhaps, the most immediate casualty has been crude oil. Brent crude rose $3.10, or 3.67 percent, to $87.68 a barrel by 0400 GMT, while US West Texas Intermediate crude was at $86.05 a barrel, up $3.26, or 3.94 percent. Both benchmarks had jumped more than $4 a barrel earlier, before easing slightly.

The surge in oil prices reversed last week's downtrend - the largest weekly decline since March - in which Brent fell about 11 percent and WTI retreated more than 8 percent amid concerns about high interest rates and their impact on global demand. This also means, companies may have to shell out more for raw materials hurting their margins.

Not surprisingly, oil producers such as ONGC gained while oil buyers were feeling the pinch. Indian Oil, Bharat Petroleum, and Hindustan Petroleum were trading down up to 3 percent.

Among Nifty50 stocks, export focussed HCL Tech, Dr Reddy’s Labs and TCS rose 1-2 percent as the US dollar rose against the Indian rupee which will result in higher revenue for them. Other gainers in the club were Eicher Motors, HUL, Coal India and Tata Consumer.

Volatility spiked sharply measured by India VIX that rose nearly 9 percent to 11.19.

Broader markets also traded with cuts, underperforming the Nifty. Nifty Smallcap dipped 1.35 percent and Nifty Midcap fell 1.10 percent. Nifty 500 declined 0.72 percent.