Sensex falls 750 pts, Nifty below 22,650: Rising crude prices among key factors behind market decline
Rising crude prices, fall in bank shares are among key factors weighing on investor sentiment on March 30
Benchmark indices Sensex and Nifty saw selling pressure for second straight session on March 30 after oil surged above $114 a barrel as an expanding Middle East war sapped risk hunger.
At 09:57 am, the Sensex was down 748.20 points or 1.02% at 72,835.02, and the Nifty was down 198.15 points or 0.87% at 22,621.45. About 1,047 shares advanced, 2,543 shares declined, and 154 shares were unchanged.
Rising crude prices
Brent crude rose 3% to $115.98 a barrel, bringing its gains for the month to 60% and topping the jump that followed Iraq’s invasion of Kuwait in 1990. US crude climbed 3% to $102.52, making a monthly rise of 53%.
The US-Israeli war on Iran has entered its fifth week and spread further across the Middle East, with Yemen’s Iran-allied Houthis launching attacks on Israel over the weekend, stoking fears of disruptions to shipping lanes around the Arabian Peninsula and the Red Sea.
Meanwhile, Pakistan said on Sunday it was preparing to host “meaningful talks” in the coming days to end the war, even as Tehran warned it was prepared to respond if Washington deployed troops on the ground.
“With the conflict in West Asia entering the fifth week, there are signs of escalation of the war with the Houthi’s joining the conflict and the US sending additional troops to reinforce the attack. Brent crude has again shot up to $116. The Goldilocks macro scenario which India had before the war has almost disappeared thanks to the war. Instead of high GDP growth, low inflation, moderate fiscal and current account deficits and expectations of higher corporate earnings growth in. FY27, now we face prospects of lower GDP growth, higher inflation, higher fiscal and current account deficits and lower earnings growth for FY27.
“The market has broadly discounted these negatives as reflected in the decline in the Nifty trailing PE ratio to about 19.9 times. This is fair but not yet cheap valuations. But there are segments which are attractively valued like financials,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
Bank shares fall
Bank Nifty fell over 2% as the central bank has tightened limits on lenders’ net open forex positions as it moved to curb instability in the weakening rupee.
The Reserve Bank of India late Friday directed banks to cap their net open rupee positions in the foreign exchange market at $100 million by the end of each trading day, with compliance required latest by April 10.
The RBI’s curbs on onshore position limits are expected to lead to dollar selling by banks in the domestic foreign exchange market amid unraveling of existing arbitrage positions.
These arbitrage trades were constructed by buying dollars onshore and selling them in the NDF market to exploit the spread between the two segments.
This spread had widened significantly amid a pickup in volatility and the fall in rupee on elevated risk aversion and oil-driven pressures linked to the Iran war.
The size of such conditions is estimated at $25 billion to over $50 billion.
Selling by foreign investors continues
Foreign investors unloaded Rs 4,367 crore worth of Indian shares on Friday, per provisional data.
“FPIs were net sellers on all trading days in March, so far, taking the total FPI selling through exchanges in March through 27th to a record Rs 1,18,093 crore, as per NSDL data. The weakness in global equity markets following the war in West Asia, the steady depreciation of the rupee, fears of decline in remittances from the Gulf region and concerns surrounding the impact of high crude price on India’s growth and corporate. earnings contributed to the sustained selling by FPIs,” said VK Vijayakumar.
Monthly Nifty F&O Expiry
With March 30 being monthly Nifty F&O expiry, volatility is expected. VIX rose over 8% to 28.78. Markets are shut on March 31 for a holiday.
The stock market continued its slide on Monday amidst concerns surrounding the conflict in West Asia and rising energy prices.
The benchmark Sensex index had fallen by more than 500 points or 0.7% as of 9.30 AM. The Nifty had sunk 0.6%, or by nearly 150 points.
Stock markets had begun to slide on March 2 after the conflict started.
The India VIX index, which measures market volatility, spiked 5.5% on Monday.
Major Asian stock indices also continued their fall on Monday. As of 9.25 am Indian time, Hong Kong’s Hang Seng index was down 0.9%, South Korea’s Kospi had fallen 2.9% and Japan’s Nikkei 3.5%. China’s Shanghai Composite recovered 0.2% after opening the session in the negative.
rupee slides
The value of the Indian rupee improved marginally on Monday after the Reserve Bank of India tightened restrictions on onshore position limits, amidst weeks of foreign funds outflow and falling stocks.
The Indian currency was traded at 93.8 against the United States dollar on Monday. It had fallen to a record low of 94.82 when the session finished on Friday.
On Friday, the Indian central bank directed banks to limit their net open rupee positions in the foreign exchange market at $100 million by the end of each trading day, Reuters reported.
global energy prices
Global oil prices have increased by more than 50% since the conflict started.
The benchmark Brent crude was trading at nearly $115 per barrel on Monday. The price was $78 per barrel on February 27, a day before the conflict began.
US WTI crude was trading at $101 per barrel. The price was $67 per barrel on February 27.
Iran has effectively blocked the Strait of Hormuz for most international commercial vessels since the conflict started. About 20% of global petroleum supply passes through the maritime chokepoint.
For more such information, connect with us today: : www.globalmediaa.com
