Sensex, Nifty top 1.5%: Here is why the stock market is declining today

 

Sensex, Nifty Crack 1.5%: Here is why the stock market is declining today

The Indian stock indices, Sensex and Nifty dropped sharply on Friday after geopolitical tensions between Israel and Iran caused a 13 per cent rally in Brent crude oil prices.

All the Indian equity benchmarks suffered major losses on Friday tracking the rising geopolitical tension and crude oil prices, which surged more than 1 percent. The Sensex pack of 30 shares was down by 1,337.07 points or 1.63 per cent at 80,354.59, and the broader Nifty index was down by 415.20 points or 1.67 per cent at 24,473.

The market decline was preceded by Israeli attack on the nuclear installations in Iran that led to increased price of Brent crude oil. The August contract of Brent crude oil rose by more than 13 per cent to hit a high of 78.50 dollars per barrel. At the last check, the price had remained up by 8.79 per cent to $75.36 a barrel.

Volatility was reflected in the Asian markets with indices in Japan, mainland China, Hong Kong, Korea and Taiwan declining by up to 1.3 per cent. The investors also responded to the rising oil prices by sending the stocks of oil marketing firms in India, such as BPCL, HPCL and IOC, down by up to 4%.

In a report by news agency Reuters, Israel said that it had attacked nuclear facilities of Iran, its ballistic missile production plants and senior military commanders. This act of military was announced as the long-term operation of preventing Iran to have a nuclear weapon.

Domestic factors also dulled the market mood, although the Reserve Bank of India (RBI) made a large rate cut. As the 13 th day of the month falls on a Friday, the market is filled with caution as the bearish sentiment is strengthening- even though the RBI has provided a jumbo rate cut, the banking stocks are weak, and the FI Is have sold around Rs 3549 crore in this June itself, which will keep the markets volatile, said Prashanth Tapse, Senior VP (Research), Mehta Equities.

International tensions added to geopolitical worries, as the former US President Donald Trump threatened to impose 55 per cent tariffs on China, the latter deemphasised their trade agreement with the US. In the meantime, the WTI crude oil was trading unchanged at 75 dollars a barrel due to continued US-Iran tensions.

Futures of crude oil rose to above $78 a barrel, the highest in two months, as renewed tension between Israel and Iran stoked fears of supply interruption, said Rahul Kalantri, VP Commodities at Mehta Equities.

 

We believe that the price of crude oil will continue being volatile in the current session. On the international scene, support of crude is at 70.40-68.50 and resistance lies at 74.00-75.20. On Indian markets, he added, the suppliers stand at Rs 5,6905,630 and the resistances are positioned at Rs 6,2006,450.

Markets stayed on edge as the trading day went on, as a part of the bigger global uncertainties and direct influence of geopolitical development on the financial markets. The conservative investor attitude outlined the possibility of more volatility.

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