Mumbai: Indian equities were hit by the tensions simmering in the Middle East, as India, one of the world's biggest oil consumers with close to 84.5 per cent crude oil coming from imports, stared at potential supply disruptions and the consequent rise in the import bill.
Benchmark indices Sensex and Nifty-50 fell sharply in line with the other Asian markets, fearing the fallout of a military retaliation by Iran after last week’s US killing of one of Iran’s top military generals.
The Sensex logged its biggest one-day loss in the last six months, down by 788 points or 1.90 per cent, and closed below the 41,000-mark at 40,676.63. The Nifty-50 closed below the 12,000-mark at 11,993, down by 234 points.
The BSE Mid-cap Index down 2.31 per cent and the Small-cap, down 1.96 per cent.
Volatility index India VIX, an indicator of expected volatility in the equity market, climbed up 16 per cent to 14.77, most in 23 months.
“Markets remain wary of the negative impact of rising oil prices on India’s balance of payments, with the country already running into heavy current account deficit. Therefore, we expect the rupee to be under pressure as crude prices have jumped nearly 15 per cent in the last quarter on the extension of a production cut pact by key producers,” said India Forex Advisors.
The rupee fell to a low of Rs 72.11 per dollar intra-day but recovered later to close at Rs 71.93.
Siddhartha Khemka, head-retail research, Motilal Oswal Financial Services, said, "There would be weakness in the market in short term due to the major escalation in tension in the Middle East. Market sentiments have turned negative, with rising fear of oil supply disruption after US President Donald Trump threatened sanctions on Iraq, the second-largest producer among the Opec, after Iraq's parliament voted in favour of expelling the US and foreign troops. Trump also threatened to retaliate against Iran after the country vowed to avenge the killing of its top commander."
The Bank Nifty Index fell 2.59 per cent, causing much damage to the benchmark indices loaded with financial heavy weights. All the sectors ended in red, led by Nifty PSU Bank (-4.3 per cent), Metals (-2.9 per cent) Autos (-2.4 per cent) and Realty (-2.4 per cent).
Nifty Energy index fell 1.98 per cent, led by the sharp fall in oil marketing companies –the top losers were HPCL (-7.28 per cent), BPCL (-3.23 per cent) and IOC (-1.62 per cent).
Foreign portfolio investors were net sellers by just Rs 103.84 crore and domestic institutions by Rs 23.70 crore as per the provisional data.