Indian Markets To Face Volatility Amid Middle East Tensions, Say Analysts
Investors, already unsettled by inflation and the possibility of higher-for-longer interest rates are now facing additional volatility due to the escalating crisis in the Middle East.
Market participants, already unsettled by inflation and the possibility of higher-for-longer interest rates, are now facing additional stress caused by the escalating crisis in the Middle East, according to analysts. This would increase the crude oil price and keep the Indian market volatile.
"We expect markets to remain volatile in the near term given global concerns and the start of an election next week," said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, advises investors to remain guarded since the element of uncertainty is high in tense situations.
BSE S&P Sensex fell 1.25% intraday, or 929.74 points, on Monday, while NSE Nifty 50 dropped 1.14%, or 255.85 points. Most sectoral indices were lower, with Nifty Bank and Nifty Media falling the most. Broader markets underperformed—the S&P BSE Midcap was 3.45% lower, and the S&P BSE Smallcap traded 3.49% lower.
What Market Analyst Have To Say
'Markets To Remain Volatile In Near Term'
Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services Ltd.
Uncertainty over the US Fed rate cut timing and concerns about rising tensions between Iran and Israel led to a decline in global markets. The rise in bond yields due to hotter-than-expected US inflation and amendments in the India-Mauritius tax treaty, which are likely to impact FII flow, dampened sentiments, Khemka said.
"We expect markets to remain volatile in the near term given global concerns and the start of an election next week," Khemka said.
He said that with the onset of the earning season, the focus will shift more towards domestic cues and macro data points.
'Many Headwinds That Will Weigh On Markets'
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services
There are many headwinds that will weigh on markets; the renewed conflict in the Middle East, proposed changes in the India-Mauritius tax treaty, and the hotter-than-expected US inflation are negatives. However, the price partially reflects these negatives as the market discounted the higher US inflation on Friday and anticipated retaliation from Iran.
"Investors have to be guarded since the element of uncertainty is high in a tense situation like this," he said.
'...Have A Significant Impact In Domestic Equity Market'
Vikas Jain, Senior Research Analyst at Reliance Securities
The market trend would be determined by geopolitical factors, macroeconomic data, quarterly earnings and institutional activities in the holiday-shortened week ahead, Jain added.
"Iran's reprisal attacks on Israel are unlikely to have a significant impact on the domestic equity market unless Israel responds, in which case crude oil prices could spike on supply disruptions," he said.
'Fuel The Sudden Rise Of Bearish Bets In Indian Market'
Rupak De, Senior Technical Analyst at LKP Securities
The escalating Iran-Israel conflict may impact the Indian stock market. The Indian Nifty has already begun unwinding the gains from the initial days of the current month due to rising US inflation and the impending pause in rate cuts by the Fed, Rupak De added.
"This geopolitical tension might further fuel the sudden rise of bearish bets in the Indian stock market. Furthermore, rising crude oil prices could put pressure on Indian equities. Overall, sentiment might remain weak in the short term," he said.
