On Friday, the domestic benchmark indices ended in the red, snapping a two-session upward trend as the war in Middle East showed no signs of easing.
India’s benchmark stock indices opened over 1% lower on Monday as the war in West Asia entered its fifth week and crude oil prices remained elevated as a ceasefire in the region looked unlikely. At 1015 am, both the Sensex and the Nifty were down 1.1%.
Other than metals and oil and gas, all other sectoral indices of the National Stock Exchange were in the red. The India VIX, a measure of volatility in the market, surged nearly 6% to its highest levels since the coronavirus pandemic.
The NSE’s metal index pared some gains but was still trading over 0.5% higher on Monday as aluminium prices jumped as much as 6% to four-year highs after smelters owned by two of the largest producers of the metal in West Asia were damaged in attacks from Iran over the weekend.
The market fall on Monday comes as Yemen’s Iran-aligned Houthis group launched attacks on Israel over the weekend, adding to tensions in the region. Iran has also continued its strikes on various sites across the region. Meanwhile, the Indian rupee strengthened sharply against the US dollar after the Reserve Bank of India late Friday announced a change in norms that capped the ability of banks to make speculative bets against the Indian currency.
While the US has maintained a temporary ceasefire on Iran, President Donald Trump said early on Monday that the US military has taken out targets in the West Asian country. “Big day in Iran. Many long sought after targets have been taken out and destroyed by our GREAT MILITARY, the finest and most lethal in the World,” Trump said on Truth Social early on Monday.
In an interview with the Financial Times over the weekend, Trump said he would like to seize control of Iranian oil, similar to what was done in Venezuela, leading to fears of the temporary ceasefire not lasting long.
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Other Asian stock indices such as those in South Korea, Japan, and Hong Kong were down 1-3% in early trade on Monday, tracking a fall in US markets on Friday.
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“We see better reward-risk balance in more parts of the market after a decent correction in valuations of the market and many sectors and stocks. However, we would stress that the better reward-risk balance should not be construed as anything beyond that. This is nowhere such as March 2009 or March 2020, when we had unequivocally recommended buying the market. We still find valuations on the higher side for the bulk of the consumption and investment names,” Kotak Institutional Equities said in a note dated March 26.
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