Sensex, Nifty open lower as oil prices jump on fresh US-Iran tensions

The S&P BSE Sensex fell 314.58 points to 77,301.82, while the NSE Nifty50 declined 85.45 points to 24,125.55 as of 9:35 am.

In Short

• US-Iran tensions pushed crude above $85 per barrel, highest since June
• Nifty Auto and Financial sectors led losses; Metal and Pharma gained
• Experts warn of market headwinds from crude spike and inflation rise

Benchmark stock market indices opened lower on Tuesday as rising tensions between the US and Iran pushed crude oil prices higher, raising concerns over inflation and weighing on investor sentiment.

The S&P BSE Sensex fell 314.58 points to 77,301.82, while the NSE Nifty50 declined 85.45 points to 24,125.55 as of 9:35 am.

The weakness in domestic equities followed an escalation in the Middle East conflict after the US military carried out a third consecutive night of strikes against Iran. US President Donald Trump also reinstated a blockade of Iranian shipping and proposed a 20% fee to guard the Strait of Hormuz, fuelling concerns over global energy supplies.

Brent crude briefly crossed the $85-per-barrel mark, its highest level since the US and Iran signed a memorandum of understanding to end the war on June 17. It was last trading around $84.6 per barrel, up nearly 11% for the week.

The surge in crude prices also weighed on the rupee, which slipped past the 96-per-dollar mark for the first time since late May. The currency weakened nearly 0.5% to 96.0775 against the US dollar.

The broader market also traded lower. The Nifty 100, Nifty 200 and Nifty 500 were down around 0.3%, while the Nifty Midcap 100 and Nifty Smallcap 100 also slipped. However, India VIX rose 3.27%, indicating an increase in market volatility.

Sectoral performance remained mixed. Nifty Auto was the biggest loser, falling 1.22%, followed by Nifty Financial Services Ex-Bank (-1.02%), Nifty Realty (-1.06%), Nifty Financial Services (-0.86%), PSU Bank (-0.77%) and Private Bank (-0.70%). On the positive side, Nifty Metal gained 1.01%, while Pharma rose 0.79%, Healthcare advanced 0.72%, FMCG added 0.33% and IT edged up 0.17%.

Among the Sensex constituents, InterGlobe Aviation led the losers, declining 2.35%, followed by Bajaj Finance (-2.14%), Mahindra & Mahindra (-1.80%), HCLTech (-1.76%) and UltraTech Cement (-1.50%). On the gaining side, Bharti Airtel rose 1.69%, TCS gained 1.27%, Tata Steel added 0.99%, Adani Ports climbed 0.82% and Sun Pharma advanced 0.75%.

Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said the renewed geopolitical tensions have created fresh headwinds for the domestic market.

"There are some headwinds blowing again which might impact the Indian market in the near-term. The escalation of tensions in the U.S.-Iran conflict has pushed Brent crude to $84. If this spike continues it will again start impacting India’s macros. The BoP vulnerability and the potential impact on the rupee can again become issues that may impact the market adversely.

"The spike in the U.S. 10-year yield to 4.61% is another concern which can impact FPI flows. India’s CPI inflation in June has increased to 4.38% and is likely to inch up higher.

"Given these headwinds, investors have to exercise caution. In this fast-changing geopolitical and economic environment, investment decision-making is becoming extremely challenging. Investors may watch this dynamic situation and wait for clarity to emerge, particularly on the crude price front.

"IT stocks are bouncing back from low levels helped by low valuations and better-than-expected Q1 results from TCS and HCLTech. This appears to be a short-term tactical trade."

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

- Ends