Renewed tensions in the Middle East sent benchmark indices Sensex and Nifty into a tailspin on April 15. Most of the sectors came under pressure, with IT and banking indices emerging as the worst hit. However, analysts believe that the war woes are mostly priced in and investors will now take cues from corporate earnings season and 2024 general elections for further direction.
The Sensex was down 620.70 points or 0.84 percent at 73,624.20, and the Nifty was down 181.40 points or 0.81 percent at 22,338. The market breadth weighed towards losers as about 804 shares advanced, 2,579 shares declined, and 95 shares were unchanged.
Nishit Master, Portfolio Manager of Axis Securities PMS believes that markets have priced in the current escalation in the Middle East. "Market participants will take guidance from corporate earnings season and 2024 general elections from here on. Some volatility could keep markets rangebound in the near term," he said.
Vinit Bolinjkar, Head of Research at Ventura Securities, too, expects markets to remain on the sidelines, given the near-term uncertainty. However, he remains bullish on India's medium-to-long-term bullish uptrend due to strong macros. "In this market, we see pharma stocks to be attractively valued," he recommended.
Iran launched 300 missiles and drones against military targets inside Israel on April 13, in response to an Israeli strike on its embassy compound in Damascus, Syria earlier this month. While analysts are hopeful of no further escalation, Israel has vowed to 'exact a price' from Iran in retaliation for the large-scale aerial attack.
If it further escalates, it could disturb commodity supplies, especially oil, and prompt investors to flee away from equities and seek refuge in safe havens like gold, said market experts.
"Any escalation that can impact oil production of Iran or affect the oil transit through the Strait can result in a sharp spike in the oil prices. Iran produces 3.2 million barrels per day of crude oil and also has a significant control on the Strait of Hormuz which accounts for 30 percent of oil transit and 70 percent of oil shipment to Asia," said Swarnendu Bhushan, Co-Head of Research at Prabhudas Lilladher.
Since the escalation, Brent oil prices have cooled off by 2 percent to $90 per barrel from its peak of $92 a barrel, while WTI crude was down by 3 percent to $85 per barrel from $88 per barrel.
The signals from the crude market indicate that the Iran-Israel conflict is unlikely to escalate, said V K Vijayakumar, Chief Investment Strategist, at Geojit Financial Services. "So the situation may calm down," he predicted.
However, Vijayakumar suggested investors remain guarded since the element of uncertainty is higher during a tense situation like this.
Having said that, investors will also track India Inc's fourth-quarter results. Vijayakumar of Geojit Financial Services expects IT stocks to be resilient on the back of better-than-expected numbers from TCS and a promising outlook for FY25. Banking, too, will exhibit strong moves as their results are likely to be positive, he added.
Meanwhile, broader markets too bled on April 15, with BSE Midcap and BSE Smallcap declining over a percent each. Fear gauge India VIX, on the other hand, jumped more than 8 percent to 12.46.
Against this, market experts recommend investors avoid taking any aggressive long positions and book profits on any rise.
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