Stocks Feel the West Asia Heat, But Don't Boil Over

Time of India

5 days ago

Indian equities
retreated Monday after the US risked its own billion-dollar-plus military assets to pound subsurface Iranian nuclear sites over the weekend, but the broadest gauges erased initial losses to end about half a percent lower following modest gains in crude
oil prices
.
'Markets will closely watch for further escalation in West Asia that could affect oil supply and pricing,' said Nilesh Shah, MD, Kotak Mahindra AMC. 'It will be fair to assume the risk aversion will rise with escalation and will have an adverse impact on markets.'
The Sensex shed 511.36 points, or 0.6%, at 81,896, while the Nifty declined 140.50 points, or 0.5%, to settle at 24,670. Technology bellwethers Infosys, HCL Technologies and TCS, which together account for the second biggest Nifty weighting, fell 1-3% and led the decliners.
The technology pack drifted after the revenue guidance by Accenture, the world's largest services company by market value, fell short of market expectations.
Rupee, Hedging Costs Hold Steady9
Both indices, which fell as much as 1% earlier in the day, erased a portion of the losses on expectations that the Iranian response to the US strikes would not be severe.
Tehran's threat that it would block the Strait of Hormuz —a critical route for the global oil trade—has raised both the geopolitical risk quotient and investor caution for emerging markets susceptible to fuel price fluctuations.
The measured advance in oil prices on Monday reflected market expectations of a restrained reaction by Iran to the US attacks. Brent crude futures rose 0.8% to $77.60 a barrel after opening above $80. Bonds—from US Treasuries to European securities—weakened on concerns higher oil prices could raise inflationary pressures. Gold futures advanced 0.2% at $3,393.40 per ounce in New York.
'Recent events suggest the US and Israel have established airspace dominance and inflicted significant damage on Iran's ability to counter-attack,' said Mihir Vora, CIO, Trust AMC. 'As a result, it may not be easy to disrupt the sea-traffic movement in the Gulf.'
Vora said as long as oil stays within the $65-86 range, India can manage the volatility. 'Only if it spikes to extreme levels—like $100-120—can oil create problems,' he said.
Elsewhere in Asia, most markets ended weak. Japan fell 0.1%, South Korea declined 0.2%, Indonesia dipped 1.7% and Taiwan dropped 1.4%. China and Hong Kong rose 0.7% each. The pan-Europe index Stoxx 600 closed 0.28% lower.
The pan-Europe index Stoxx 600 was down 0.26% when this report was going into publication.
At home, the Nifty Midcap 150 index rose 0.4%, while the Nifty Smallcap 250 advanced 0.8%. Of the total 4,240 stocks traded on the BSE, 2,198 declined and 1,862 advanced.
The India VIX—the market's fear gauge—rose 2.74% to 14.05, indicating elevated nervousness among traders.