Benchmark stock market indices crashed in early trade over rising crude oil prices due to the Iran war, involving Israel and the US. Investor sentiment has been bearish and that reflected in the selloff on Dalal Street.
The S&P BSE Sensex tanked 2,444.51 points to 76,474.39, while the NSE Nifty50 lost 729.90 points to 23,720.55 as of 9:28 am.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said that brent crude has spiked above $115 delivering a big oil shock to economies and markets.
“Big oil importers like India will be hit hard if the West Asian conflict lingers long and crude price remains high. The market will price-in the economic consequences of this oil shock. Inflation will certainly move up whether the oil price hike is passed on to consumers or not.,” he added.
The unknown factor now is how long the conflict will last. This uncertainty will also weigh on FIIs who have again turned aggressive sellers in India after the short bout of buying in February.
The lesson from history is that the impact of geopolitical issues like conflicts on markets do not last long. Therefore, investors have to be patient.
Domestic consumption segments like banking and financials, automobiles, telecom and cement will not be impacted much by the crisis. Defence and pharmaceuticals will be relatively resilient. Long-term investors with high risk appetite can nibble at stocks in these strong themes.