MUMBAI: Investors are feeling jittery following the escalation of conflict in West Asia, which has led many on Dalal Street to anticipate a lower opening for the Sensex on Monday. With the U.S. targeting three nuclear sites in Iran, tensions have risen, prompting fears of increased crude oil prices due to the potential closure of the Strait of Hormuz, a crucial transit route for around 20% of the world’s crude and natural gas.
On Friday, investors appeared unfazed by geopolitical tensions, resulting in the Sensex rising by over four hundred points to close at 82,408, while the Nifty gained 319 points, closing at 25,112. At the same time, oil prices have been nearing four-month highs, with Brent crude trading above $77 per barrel and WTI around $75.
Nilesh Shah, MD of Kotak Mahindra Mutual Fund, noted that while global pressures are intense, India’s robust economic fundamentals may provide some stability. He described the Indian equity and rates market as “a man having average temperature with one leg in cold water and the other in hot water,” highlighting the mixed impact of domestic and international factors. Shah emphasized the importance of closely monitoring oil availability and pricing, mentioning that while India’s foreign exchange reserves can handle moderate oil price increases, a surge into triple-digit prices could pose challenges.
Investors are advised to view any market corrections as opportunities for long-term accumulation, while traders are encouraged to adopt a cautious approach. Additionally, the geopolitical uncertainty might drive investors toward safer assets such as gold and government bonds, as they seek to minimize risk in the current climate.
Interestingly, some market players remain optimistic, suggesting that if Iran refrains from aggressive retaliation, the markets may stabilize after what is expected to be a negative opening on Monday. Notably, the TA 35 index in Israel showed resilience, rising over 1% in trading, reflecting a potential divergence in how investors are approaching these geopolitical tensions.
Overall, while the outlook may appear uncertain, there is a glimmer of hope that with strategic navigation, investors can still find opportunities in these turbulent times.