Sunday, April 14, 2024

Israel-Hamas conflict saw investors lose Rs 4 lakh crore as markets witness freefall


The Israel-Palestine war and associated geopolitical uncertainties have set off uneasy tremors across global markets. India, too, is feeling the ripple. 

The Nifty50 index opened substantially lower at 19,539.45, marking a drop by 0.90% from its previous close of 19,653.50 and bottoming out at a low of 19,480.50. The Sensex saw a similar fate, opening at 65,560.07, a 0.85% decline from its previous close of 65,995.63 and touching a low of 65,434.61 during the early trade. The impact? Investors lose nearly Rs. 4 lakh crore.

But the Israel-Hamas war is not the only catalyst in play here. Let’s understand the multiple factors that seem to be influencing the market. 

Israel-Palestine War: Unpredictable Impact 

Israel declared war on Hamas following an assault from Gaza, leading to several unfortunate casualties and hostage situations. While it may seem that the immediate repercussion on the markets is insignificant, experts warn that an escalating conflict could potentially send tremors through the global economy. The speculation surrounding this conflict is distinctly alarming for investors and, with the situation in flux, the road ahead seems uncertain. 

Crude Oil Prices: On an Upward Swing 

The ongoing discord has seen crude oil prices spike sharply by over 4%. Although prices were corrected by about 9% in the previous week, the continuing tensions in West Asia could drive oil prices higher, particularly if Iran enters the fray. If the increase in oil prices sustains, it could negatively affect India’s trade balance and fiscal status. 

Q2 Earnings: Caution in the Air 

As Indian corporates gear up to announce their earnings for the quarter ending September, investors proceed with caution. The expectation is for a somewhat muted performance overall, with some sectors showing moderate year-on-year growth. 

Motilal Oswal Financial Services projects a 15% year-on-year increase in Nifty earnings for the quarter, primarily driven by domestic cyclical sectors like BFSI and auto, while predicting a more moderate earnings growth for technology and metals sectors.

Following the same cautionary tone, uncertainty clouds the path ahead. Concerns are widespread about rising interest rates and their potential effects on economic growth, causing worry among investors worldwide.

FII Selling and Market Indicators 

On the one hand, the US Federal Reserve’s indication of a likely interest rate increase has shattered hopes of a plateau in rate hikes. Meanwhile, the Reserve Bank of India’s Monetary Policy Committee maintains the repo rate at 6.5%, reflecting a firm stand. Furthermore, data from the NSDL shows Foreign Institutional Investors (FIIs) actively offloading Indian equities, primarily due to rising bond yields and a stronger dollar index. FIIs released Indian equities worth Rs. 14,768 crore in September and Rs. 7,998 crore in October alone. 

The Israel-Palestine conflict has undeniably spooked investors. As equities benchmarks Nifty 50 and the Sensex crashed about a percent each in early trades, investors found themselves retreating. But the market has shown signs of pulling up, and the overall market capitalisation of firms on the BSE too, reflects a cautious upward swing. 

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