West Asia Crisis Sends Indian Equity Markets into Free Fall
India's equity market benchmarks, BSE Sensex and NSE Nifty50, took a hit this week due to rising geopolitical tension in West Asia. The price of Brent crude oil surged to $100/barrel, contributing to investors' woes. A falling rupee and relentless selling by foreign institutional investors (FIIs) also weighed on the market.
The US and Iran's conflict over control of the Strait of Hormuz, a crucial checkpoint for oil and gas, intensified after hostilities resumed last week. The US forces conducted 13 consecutive waves of strikes against Iran as Iranian officials rejected a US-backed ceasefire proposal.
As a result, the Sensex fell by 2.68% while the Nifty50 declined by 2.33% during the recently concluded trading week (20th July, 24th July). The broader indices - NSE Midcap 100 and NSE Smallcap 100, also saw selling pressure with declines ranging from 1-2%.
Inflationary fears intensified as crude oil prices jumped about 10% this week. Market expectations for a September rate hike have firmed up, Vinod Nair, Head of Research at Geojit Investments, noted. Higher oil prices are likely to translate into higher inflation in the coming months, exerting pressure on currency stability and corporate margins.