Indian markets fell around 1% in intraday trade today as global peers fell amid rising geopolitical tensions in the Middle East.
Iran fired more than 300 drones and missiles at Israel over the weekend in response to Israel’s attack on the Syrian embassy. Under these circumstances, the United States and other Israeli allies are calling for restraint. Notably, US President Joe Biden reportedly warned Prime Minister Benjamin Netanyahu that the US would not engage in retaliatory action against Iran. Reuters.
Although Indian markets fell today, experts do not think the Middle East conflict will have a long-term impact on Indian indexes.
“The potential escalation of the conflict between Iran and Israel is a serious development and is likely to have a negative impact on oil prices. The Indian market will also be under pressure in the short term. However, given the strong “In the long term, the fundamentals and growth trajectory remain strong,” said Samir Bahl, CEO of investment banking at Anand Rati Advisors.
Meanwhile, VK Vijayakumar, chief investment strategist at Geojit Financial Services, also said that while signals from the oil market suggest tensions are unlikely to escalate, he cautioned investors in the short term. He pointed out that
“A number of headwinds are weighing on the market today, including a flare-up in the Middle East conflict, proposed changes to the India-Mauritius tax treaty, and higher-than-expected US inflation.However, in part these negative factors are “Retaliation from Iran is expected, and while markets on Friday were discounting higher US inflation, signals from the oil market indicate that tensions between Iran and Israel will intensify.” President Biden has made it clear that he does not support Israeli retaliation, indicating that this is unlikely. Therefore, although the situation may calm down, investors need to be cautious as there is a high element of uncertainty in such a tense situation,” the expert said.
But in the short term, what are the key levels for investors to pay attention to?
Ajit Mishra – SVP of Research, Religare Broking It said the market’s reaction to news of renewed escalation in the Middle East was largely in line with other global counterparts. However, after the initial decline, some regions have seen a rebound, helping the index recoup its losses.
On the index side, we are looking at the 22,150-22,350 zone to act as a leading cushion, and if it rebounds towards the 22,600-22,800 zone, profit-taking could occur. Meanwhile, traders should continue with a stock-specific approach and prefer a hedged approach.
Additionally, escalating tensions in the Middle East have increased the safe-haven appeal of bullion in the bullion market and increased the likelihood of oil supply disruptions from major producing countries. There may be a lull after the recent rally to the $90s, and prices will likely remain within the $87-$92 zone, but the mood remains positive.
Where do we go from here?
Manoranjan Sharma, Chief Economist – Infomerix Ratings
Iran launched 300 missiles towards Israel. Most of these missiles were successfully disarmed by Israel. However, this massive onslaught marks a new flashpoint in the Israeli-Palestinian conflagration and signals a significant deterioration in the geopolitical situation in general, and in the Middle East in particular.
World War III has not yet broken out, at least not yet, but horizontal escalation and retaliatory or even deterrent strikes by Israel are clearly possible, even possible.
Going forward, the US government’s position is likely to be a key factor in this rapidly evolving situation.
This war has far-reaching effects and impacts across geographies, economies, and sectors, with temporary fluctuations in bond and stock markets. Lower profitability and increased uncertainty in the corporate sector will cause bond prices to fall, corporate credit costs to rise, oil prices to rise, and stock markets to fall. A continued decline in oil supplies and the resulting rise in oil prices could increase domestic inflation and keep interest rates high for an extended period of time. A bewildering composition supports the safe-haven dollar and gold.
Impact by sector
High oil prices can have a cascading macroeconomic impact across sectors, triggering sell-offs, but oil-based sectors such as automobiles, transport, aviation, paints, tires, cement, and chemicals are the hardest hit. There is a possibility of receiving. Sharma said that while war-related risks could disrupt markets, he expects oil supply and demand dynamics to remain unrestricted.
Indian stocks with ties to Israel include Adani Ports, Sun Pharmaceuticals, Dr. Reddy’s & Lupine, NMDC, Kalyan Jewelers and Titan. Additionally, oil marketing companies may be adversely affected. He added that the war could stall India’s plans to build the India-Middle East-Europe Economic Corridor, as reflected in the prices of railway stocks such as IRCON, Jupiter Wagon and RVNL.
Disclaimer: The views and recommendations above are those of individual analysts or brokerages and not of Mint. We recommend checking with a certified professional before making any investment decisions.
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