Market indices Sensex and Nifty fell in early trade on Wednesday as escalating tensions in West Asia pushed crude oil prices close to the US$100 per barrel mark. A sell-off in IT stocks and a fresh outflow of foreign funds also dampened investor sentiment.
The 30-share BSE Sensex fell 500.25 points to 75,060.61 in early trade. The 50-share NSE Nifty fell 129.40 points to 23,506.10. Among the 30 Sensex firms, HCL Tech, Tech Mahindra, Infosys, Tata Consultancy Services and Hindustan Unilever were the top laggards. The winners included NTPC, Larsen & Toubro, Power Grid and Adani Ports. Brent crude is trading around $99.60 a barrel after the US-Iran conflict widened and Iran-backed Houthi attacks destroyed Saudi Arabia’s energy infrastructure.
“For India, sustained oil prices at or above US$100 could increase inflationary pressures, put pressure on the rupee and the current account, lower corporate earnings and reduce expectations of monetary easing. As a result, elevated oil prices are likely to remain a key driver of domestic market sentiment even as broader global signals improve,” said Radhakrishnan, founder and CEO of research analytics firm HST Wealth.
Brent crude, the global oil benchmark, traded 1.44 percent higher at US$99.33 a barrel. “Oil remains the main macro driver. WTI crude is holding in the $94-$95 per barrel range after the recent escalation of fighting in the Middle East has heightened fears of further disruptions to global energy supplies. With no clear signs of de-escalation, the geopolitical risk premium built into oil prices is expected to remain high, keeping global financial markets highly volatile,” Ponmudi said R., CEO of Enrich Money, an online trading and wealth technology company.
In Asian markets, South Korea’s Kospi Index, Japan’s Nikkei 225 Index and Shanghai’s SSE Composite Index were higher, while Hong Kong’s Hang Seng Index was trading lower. US markets were in negative territory on Tuesday. Foreign institutional investors (FIIs) sold shares worth Rs 123.19 crore on Tuesday, exchange data showed. On Tuesday, the Sensex fell 555.23 points, or 0.73 percent, to settle at 75,577.58. The Nifty index fell 144.05 points or 0.61 percent to close at 23,635.10.