State Bank of India (SBI), Tata Steel, Titan, IndusInd Bank and Asian Paints were among the major laggards in the Sensex pack.
Benchmark equity indices tumbled in early trade on Monday as escalating tensions in Middle East triggered a risk-off in the market.
Market analysts said investors preferred to remain on the sidelines and refrained from taking big risks as the Israel-Hamas conflict has introduced a huge uncertainty for the markets
The 30-share BSE Sensex plunged 407.19 points or 0.62 per cent to 65,588.44 points in early trade. The Nifty declined 142.70 points or 0.72 per cent to 19,510.80 points.
State Bank of India, Tata Steel, Titan, IndusInd Bank and Asian Paints were among the major laggards.
On the other hand IT majors HCL Technologies, Tech Mahindra, TCS, Wipro and Infosys, Hindustan Unilever and Sun Pharma defied the broader market trend and were trading in the positive territory.
The BSE benchmark had climbed 364.06 points or 0.55 per cent to settle at 65,995.63 points on Friday. The Nifty had advanced 107.75 points or 0.55 per cent to end at 19,653.50.
“The Israel-Hamas conflict has introduced a huge uncertainty for the markets. Nobody knows how this war is going to evolve,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
He said that even though it is unlikely to cause major disruption in oil supplies at present, the situation will change if Iran, a major Hamas supporter, is drawn into the war.
“That can disrupt oil supplies causing a spike in crude, which can trigger a risk-off in the market. This is a time to be cautious,” he added.
Traders are also expected to remain cautious ahead of macroeconomic data to be announced later this week.
The industrial production and manufacturing data for August are scheduled to be announced on October 12. Simultaneously, inflation rate for September will be announced followed by Wholesale Price Index (WPI) data on October 13.
On Friday, the Reserve Bank of India expectedly left its key interest rate unchanged and signalled it would keep liquidity tight using bond sales to bring prices closer to target.
The six-member monetary policy committee of RBI held the benchmark repurchase rate (repo) at 6.50 per cent in a unanimous decision for the fourth consecutive meeting in a row. It also retained a ‘withdrawal of accommodation’ stance.
Asian markets are trading lower on Monday as Chinese and Hong Kong shares fell.
European markets finished broadly higher on Friday with Germany’s DAX gaining 1.06 per cent. France’s CAC 40 was up 0.88 per cent and London’s FTSE 100 closed 0.58 per cent higher.
The US markets ended higher on Friday with S&P 500 closing with a gain of 1.18 per cent and Dow Jones Industrial Average Index up 0.87 per cent.
Israel-Palestine war :
The Israel-Palestine war is a fresh concern for the markets. Israel declared war against Hamas after its fighters breached the border from Gaza in a surprise attack on Saturday that killed nearly 1,000 people and wounded several others. Several Israelis were taken as hostages in Gaza after the rocket attack.
The war so far is confined to Israel-Palestine but has the potential to have a ripple effect. Experts say even though there is no need to panic at the moment, it will be crucial to see how things evolve gradually.
“The Israel-Hamas conflict has introduced a huge uncertainty for the markets. Nobody knows how this war is going to evolve. From the market perspective, it is important to understand that even though the death and destruction are tragic, presently it is unlikely to cause major disruption in oil supplies thereby impacting major oil importers like India. But the situation will change if Iran, a major Hamas supporter, is drawn into the war. That can disrupt oil supplies causing a spike in crude, which can trigger a risk-off in the market,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, observed.
“This is a time to be cautious. Investors may refrain from taking big risks. Wait for the developments to unfold. Long-term investors can slowly accumulate high-quality stocks on declines,” Vijayakumar said.
Manoranjan Sharma, Chief Economist at Infomerics Ratings believes the surprise Israel-Palestine war would have wide-ranging ramifications and repercussions across geographies, economies and sectors.
“There will be volatility in the bond and equity market temporarily. Bond yields will harden, the cost of credit may go up for companies, and crude prices will rise if it spills over to West Asia. Gold may become a safe haven,” said Sharma.
Sharp jump in crude oil prices :
Crude oil prices surged over 4 per cent on concerns over supply disruption after a war between Israeli and Palestine’s Hamas forces over the weekend deepened political uncertainty across West Asia.
Caution ahead of Q2 earnings :
There appears to be some caution in the market ahead of the September quarter earnings of India Inc. Experts are expecting the Q2 to be a soft quarter with more sectors reporting a tepid scorecard. The earnings of some sectors may show decent year-on-year growth but a firework is unlikely.
Crude prices corrected about 9 per cent last week from the year-high after oil cartel Opec proposed to keep output cuts steady at its October 5 meeting. However, a prolonged conflict in West Asia could shoot up oil prices if Iran gets actively involved in the conflict.
If oil prices go up, it will impact India’s trade deficit, the current account deficit and also to a limited extent, the fiscal deficit.
Motilal Oswal:
Brokerage firm Motilal Oswal Financial Services expects Nifty earnings to increase 15 per cent year-on-year (YoY) for the quarter.
“Overall earnings growth is anticipated to be driven once again by domestic cyclical, such as BFSI and auto, which are expected to post 26 per cent and 87 per cent YoY jump while consumer and cement would report a healthy 15 per cent and 72 per cent YoY growth, respectively,” said Motilal Oswal.
“Technology and metals are anticipated to report moderate earnings growth of 7 per cent and 6 per cent YoY, respectively. We have marginally cut our FY24 and FY25 Nifty EPS (earnings per share) estimates by 0.3 per cent and 0.9 per cent to ₹986 and ₹1,132, respectively. We now forecast the Nifty EPS to grow 22 per cent and 15 per cent in FY24 and FY25, respectively,” Motilal Oswal said.
FII selling:
Foreign institutional investors (FIIs) have been offloading Indian equities after the recent gains thanks to rising bond yields and the dollar index.
NSDL data show foreign investors sold Indian equities worth ₹14,768 crore in September and ₹7,998 crore in October so far.
Also read this:
India vs Australia ICC Men’s Cricket World Cup 2023: Date,Time and Squad, Dengue Strike on Gill
World Teacher’s day 2023 : The Unsung hero’s Who Shape World’s Future