India's benchmark indices, Sensex and Nifty 50, plummeted at the opening bell on Monday as investors remained uncertain about the Iran war. The 30-share S&P BSE Sensex fell 3.38% to 78,543 points, while the NSE Nifty 50 cracked 2.06% to 24,659 points.
The uncertainty surrounding the Iran war is expected to impact the market in the near-term, with the major risk being the energy risk arising from the surge in crude oil prices. Every $1 increase in crude oil prices raises India's annual import bill by $2 billion, leading to a weaker rupee and higher inflation.
The Strait of Hormuz, a 21-mile shipping channel to Iran's south, is virtually choked, leading to a surge in Brent crude prices. Key stocks such as IndiGo, SpiceJet, and oil marketing companies HPCL, BPCL, and Indian Oil are underperforming due to rising crude import costs.
On the other hand, stocks such as Bharat Electronics, Paras Defence, and ONGC are outperforming due to elevated crude realisations. The Macro Threat For India, the Iran war is a direct macroeconomic stress test, with elevated import costs likely to widen the current account deficit and further strain the fiscal deficit.
The rupee slipped to a multi-month low of ₹91.26 per dollar, and the dollar index surged 0.5% to the 98-level. FIIs sold equities worth ₹7,536 crore on Friday, while domestic institutions provided a partial buffer by buying ₹12,293 crore.
