The escalating tensions between Iran and Israel, further complicated by the United States’ military strikes on Iranian nuclear facilities, have sent shockwaves through the Indian stock market. On June 23, the Nifty fell below the 25,000 mark, while the Sensex dropped 511.38 points to close at 81,896.79. The declines were primarily driven by investor concerns over the potential impact of the conflict on global economic stability.
Defensive sectors such as Media and Metal emerged as the top performers, with gains of approximately 2% and 4% respectively, as investors sought safer investment options. Trent, Bharat Electronics, Hindalco Industries, Adani Enterprises, and Bajaj Finance were among the major gainers on the Nifty. In contrast, IT, FMCG, Auto, and Banking sectors experienced losses ranging from 0.3% to 1.5%.
Aditya Gaggar, Director of Progressive Shares, noted that the market formed a Harami Candlestick pattern, indicating potential indecision among investors. The immediate resistance and support levels for the Nifty are placed at 25,130 and 24,780 respectively. Despite the global uncertainty, Foreign Institutional Investors (FIIs) continued to show confidence in the Indian market, purchasing local shares worth over Rs 10,000 crore in the past four sessions.
Prashanth Tapse, Senior VP (Research) at Mehta Equities, attributed this to India’s strong market fundamentals.
Geopolitical tensions influence market drop
The Indian Rupee also felt the impact of the geopolitical tensions, ending 16 paise lower at 86.75 per dollar.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, expects the rupee to trade with a negative bias as the conflict in the Middle East unfolds. Experts caution that a sustained rise in crude oil prices could further dampen investor sentiment. Alok Agarwal, head-Quant and Fund Manager at Alchemy Capital Management, emphasized that a sharp spike in crude prices, especially beyond the $100/barrel mark, would be a major concern for the Indian economy, given its heavy reliance on crude imports.
Aniruddha Sarkar, CIO at Quest Investment Advisors, highlighted the potential impact of rising crude prices on the current account deficit, inflation, and the rupee. Sectors such as oil marketing companies (OMCs), paints, and aviation could face cost pressures if the conflict persists. As the market braces for potential volatility, investment strategists recommend staying prepared to capitalize on any market corrections.
Sandeep Bagla, CEO of TRUST Mutual Fund, and George Thomas, fund manager at Quantum Mutual Fund, both advocate for staggered investments to average out costs and reduce risk. Despite the heightened international tensions, Kenneth Andrade, founder and CIO of Old Bridge Capital Management, noted that India is in a better economic position to handle the situation compared to previous instances. However, investors are advised to stay informed and consider reassessing their portfolios to mitigate potential risks in these uncertain times.
