Domestic equity market indices declined nearly 0.6 per cent on Monday amid concerns over heightened tensions in the Middle East following US strike on nuclear sites of Iran and surge in oil prices.
The BSE’s 30-share Sensex declined 0.62 per cent, or 511.38 points, to close at 81,896.79. The broader Nifty lost 0.56 per cent, or 140.5 points, to finish the session at 24,971.9. However, both indices recouped some of the early morning losses by the close of the session. The Sensex had declined 931.41 points and the Nifty lost 287.55 points during intraday trades.
“Despite the initial setback, the market recovered most of its losses, supported by gains in capital goods and metal stocks, as fears of an immediate oil supply disruption remained low,” said Vinod Nair, Head of Research, Geojit Investments Ltd.
The losses in the early trading session was on account of strikes launched by the US on three nuclear facilities in Iran. In retaliation, Iran’s parliament approved a motion to shut the Strait of Hormuz, one of the world’s most critical chokepoints, through which a fifth of the global oil and gas supply flows. Analysts said that a closure of the Strait could lead to a major disruption in oil supply and an increase in global oil prices.
As the fears of immediate disruption in oil supply faded, Sensex and Nifty also showed signs of recovery. Brent crude oil also fell to $79 per barrel from $81 per barrel.
“Global oil price is down, which is a big positive surprise. Both oil and equity markets believe that this war (Middle East conflict) may not escalate in a big way. Secondly, Iran may not block the Strait of Hormuz as it earns over $67 billion from export of oil annually. Iran would be affected if it blocks this strait. Earning from oil is important when it is fighting a war,” said G Chokkalingam, Founder & Head of Research, Equinomics.
Despite fall in benchmark indices, Nifty Midcap 100 and Nifty Smallcap 100 gained 0.36 per cent and 0.7 per cent, respectively. Among the sectoral indices, Nifty Media gained 4.39 per cent and Nifty Metal rose 0.66 per cent. Nifty IT fell 1.48 per cent, as IT stocks came under pressure due to uncertainty around global tech spending, exacerbated by weak earnings reported by Accenture.
The NSE companies that lost the most included Ltd (2.35 per cent), (2.3 per cent), Larsen & Toubro (2.27 per cent), Hero Motocorp (2.1 per cent) and & Mahindra (1.52 per cent).
