NEW DELHI: Indian equity indices took a beating in Monday’s trade on fears of the US eliminating waivers it had given to eight countries, including India, to import crude from Iran.
The news pushed the
rupee lower and threatened foreign fund inflows, sending BSE Sensex down 400 points and NSE
Nifty below the 11,650 level.
Here’s a look at the factors hurting the market:
Crude oil on the boil
Oil prices jumped over 3 per cent in Monday’s trade on reports suggesting the US would from May 2 no longer grant waivers for importers of Iranian crude oil prices. This, reports suggest, would be clarified by the US Secretary of State
Mike Pompeo soon.
Following the reports, Brent crude futures jumped 3.3 per cent to hit a five-month high of $74.31 a barrel.
Kotak Institutional Equities in a recent note anticipated $80 a barrel level for crude, given the ongoing geopolitical tensions. Any such rise will hurt outlook for domestic stocks.
Weakening rupee
A jump in crude oil prices dragged the rupee lower against the greenback. The domestic currency was trading 25 paise lower at 69.59 against the dollar, on worries demand for
dollar will jump for importing costly oil prices. A weakening rupee hurt returns on domestic equities for foreign investors and, thus, is linked to FPI outflows. The institutional class has bought over Rs 15,300 crore worth domestic equities so far this month.
Macro worries
Brent crude oil price has surged over 35 per cent year-to-date. India fulfils 81-83 per cent of its crude demand from imports. This could potentially challenge India’s fiscal deficit and current account (CAD) and stoke inflationary concerns.
“CAD/BoP is manageable up to $70 a barrel, but beyond that external vulnerability increases at higher levels of crude oil prices,” Kotak said in a note.
F&O expiry
This is an expiry week. Last week, we had just three trading days. It is possible that the current round of weakness is partly due to F&O action. This is especially at a time when two out of seven phases of the ongoing elections are already over. Nifty rollovers till last week stood at 14.2 per cent while those of Bank Nifty at 15.5 per cent.