Investors sell big as crude raises, stock markets decline 3%

Nifty opened at 23,868.05 points, down and Sensex at 77,056.75 points. As of 12.16 p.m., they’re trading at 23850.4 points down 2.45% and 77,015.43 points down 2.43%. These levels are amongst the lowest in nearly 6 months.

Barring a few hundred stocks, all of them are declining since open at 9:00 a.m.

West Asia conflict oil hike, market reactions LIVE updates

After increasing at a rate of 7% or 8% in a single session consistently for more than a week, global crude prices hit $100 a barrel as Iran shutdown Strait of Hormuz, the route which supplies a fifth of India’s oil needs. The action was taken in retaliation to the U.S. and Israel attack on Iran and the subsequent assassination of the head of state Ayatollah Khamenei.

The blockade more than increasing prices has also brought in uncertainties regarding sustained supply of oil and natural gas which, on prolonged conflict in West Asia, may even lead to plant shutdowns, experts have been warning.

The fear of broad sectoral impact and their second order effects are reflected in the market with almost all sectoral indices opening and trading below their previous closes.

Israel-Iran war LIVE updates

“Brent crude has spiked above $115 delivering a big oil shock to economies and markets. Big oil importers like India will be hit hard if the West Asian conflict lingers long and crude price remains high. The market will price-in the economic consequences of this oil shock. Inflation will certainly move up whether the oil price hike is passed on to consumers or not.

The unknown factor now is how long the conflict will last. This uncertainty will also weigh on FIIs who have again turned aggressive sellers in India after the short bout of buying in February.

The lesson from history is that the impact of geopolitical issues like conflicts on markets do not last long. Therefore, investors have to be patient.

Domestic consumption segments like banking and financials, automobiles, telecom and cement will not be impacted much by the crisis. Defense and pharmaceuticals will be relatively resilient. Long-term investors with high risk appetite can nibble at stocks in these strong themes.”

InCred Research Services MD and Head Satish Kumar said “Market corrections are a part of the cycle. At this stage, we don’t see significant downside risk left in equities, if clarity emerges. Oil at around $115 per barrel is unlikely to sustain for long, and once prices stabilize, markets should find their footing again.

Much of the geopolitical premium is already being priced into commodities and risk assets. If the war does not escalate for extended periods, investors are likely to shift focus back to fundamentals and earnings growth.”