Tension in Iraq and the resultant rise in crude oil prices to nine months high caused sell-off at Indian stock markets. Key indices fell sharply on Friday on concerns that rising oil prices could destabilise the Indian economy and fuel inflation. On Friday Brent crude prices surged to $112.91 a barrel in early trade according to reports.
The BSE Sensex fell 348 points or 1.36 per cent to 25228 and the NSE Nifty closed with a loss of 108 points or 1.41 per cent at 7542 as stocks witnessed selling pressure. Both the Sensex and the Nifty had surged in the past few days to record highs on optimism following the induction of the growth oriented Modi Government at the Centre.
Friday’s sell-off was so high that the Nifty witnessed its biggest single day fall in four and half months said analysts.
“There were a host of factors due to which the indices witnessed fall. The market was moving up sharply and a correction was due. On Friday, the trigger came from rising crude oil prices due to tension in Iraq. If crude prices increase, India’s current account deficit (CAD) would go up and this would have negative impact on the economy. Rise in crude oil prices will also fuel inflation and this marred market sentiment,” said Alex Mathews, Research Head, Geojit BNP Paribas Securities.
He said that apart from this, valuations of stocks were slightly overstretched in the past few days and a correction was needed. Institutions were seen booking profits in a limited way on Friday.
“The rise in crude price, caused by the geo-political concerns in Iraq, marred sentiments in the markets. Several stocks, which have had a heady run over the past few weeks, fell sharply on profit-booking,” said Dipen Shah, Head- Private Client Group Research, Kotak Securities.
“Due to rise in tensions in Iraq, Brent crude has hit a nine-month high. The Indian currency was weak. Realty continued to be the biggest loser reversing most of the gains it made in the recent run-up,” said Kiran Kumar Kavikondala, Director & CEO, WealthRays Securities.
“Going ahead, we see the monsoon progress and the budget to be the two important triggers for the markets. We feel that, a progressive budget as well as other reform initiatives will likely lead to continued out-performance of Indian indices versus emerging market peers.