Indian equity markets declined Friday as escalating tensions between the United States and Iran fueled concerns over disruptions to Middle Eastern oil and gas supplies, pushing crude prices higher. The benchmark S&P BSE Sensex fell over 300 points, extending losses from the previous session’s brief rally, while the broader Nifty 50 index too closed lower.
Analysts warn that a sustained increase in oil prices could exacerbate India’s economic vulnerabilities, including its twin deficits – fiscal and current account – and contribute to inflationary pressures. The Reserve Bank of India’s (RBI) monetary policy stance could also be affected, potentially hindering any near-term rate cuts.
The conflict, triggered by reported U.S. And Israeli actions in Iran, has already pushed oil prices up approximately 15%, disrupted gas flows and prompted sell-offs in Indian equity, debt, and currency markets. The Indian rupee reached a record low against the dollar, and bond yields rose amid concerns about the country’s current account deficit and the potential for higher inflation, according to multiple reports.
Despite the weaker rupee and rising crude prices, sources familiar with policy deliberations suggest the RBI is unlikely to adopt a hawkish monetary policy, potentially maintaining lower interest rates to support economic growth. However, one source cautioned that assessments could change if the situation in the Middle East escalates further.
The RBI has already taken steps to stabilize the currency, reportedly injecting around $12 billion into the market this week to prevent a sharp fall in the rupee’s value. The central bank also stepped up surveillance of the currency market and intervened to curb volatility after the rupee hit its record low, according to traders.
Vinod Nair, Head of Research at Geojit Investments, noted that while geopolitical tensions remain a near-term overhang, “selective value-buying opportunities are expected to emerge, offering long-term investors attractive entry points.”
European markets also reacted negatively to the escalating conflict, with the STOXX 600 index dipping 0.15% in choppy trading after an earlier rise as oil prices stabilized.
Market data indicated significant trading activity in several stocks. Mazagon Dock, ICICI Bank, HDFC Bank, Reliance Industries, LT Foods, SBI, and Commercial Engineering were among the most active stocks on the BSE in value terms. In terms of volume, Vodafone Idea, Commercial Engineering, Ircon International, Suzlon Energy, YES Bank, LT Foods, and Reliance Power saw the highest trading volumes.
Stocks showing buying interest included Commercial Engineering, Kirloskar Bros, Ircon International, Radico Khaitan, United Breweries, Bharat Dynamics, and Aegis Vopak. Conversely, LT Foods, Tejas Networks, Vedant Fashions, Godrej Properties, Mahanagar Gas, Ashok Leyland, and Suven Pharma experienced significant selling pressure.
The India VIX, a measure of market volatility, surged another 11% to close near the 20 level, suggesting increased downside risks for the market. Technical analysts note that the broader market structure remains weak, and any pullbacks are likely to attract selling pressure.
Several stocks hit their 52-week highs, including MRPL, Data Patterns, Kirloskar Oil, ABB Power, BEL, and Astra Poly Tech.
Out of the 4,374 stocks traded on the BSE on Friday, 1,812 advanced, 2,396 declined, and 166 remained unchanged.
