Iran-Israel Conflict Sparks Dalal Street Selloff

The ongoing Iran-Israel conflict and surging oil prices triggered a massive selloff on Dalal Street. On Thursday, the Sensex plummeted by as much as 1,250 points in early trade, sending ripples of panic across the markets.

At 11:02 am, Sensex was down 958.55 points at 83,307.74, while Nifty50 was trading 297.50 points lower at 25,499.40. Broader market indices were also deep in negative territory.

Key Factors:

Escalation of Iran-Israel Conflict

The escalating hostilities between Iran and Israel have shaken global markets. Iran’s recent missile attacks on Tel Aviv and threats of Israeli retaliation have heightened concerns about potential disruptions to oil supplies, creating uncertainty in financial markets.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, remarked, “If Israel attacks Iranian oil installations, it could lead to a massive spike in crude prices. Such an event would hit oil importers like India hard.”

Brent crude prices have already surged past $75 per barrel, with West Texas Intermediate touching $72. For India, which heavily depends on oil imports, this escalation could worsen inflation and widen the fiscal deficit.

SEBI’s F&O Regulations and Oil Price Surge

In addition to rising oil prices, new regulations from the Securities and Exchange Board of India (SEBI) have contributed to market uncertainty. Recent changes, including restrictions on futures and options (F&O) weekly expiries, have raised concerns among retail investors, adding to the broader market weakness.

Foreign Fund Outflow and Chinese Market Rally

Foreign institutional investors (FIIs) have also been net sellers, withdrawing Rs 5,579 crore from Indian equities on Tuesday. This exodus is largely attributed to a rally in Chinese markets following stimulus measures announced by the Chinese government. The SSE Composite Index surged by 8% on Tuesday, and has gained over 15% in the past week.

Prashanth Tapse, Senior VP (Research) at Mehta Equities, explained, “FIIs are shifting funds from Indian markets to Chinese stocks, which are currently trading at more attractive valuations.”

What’s Next?

Market experts advise caution amid the ongoing volatility. Vijayakumar suggested that investors could consider a partial switch to defensive stocks like Pharma and FMCG to mitigate exposure to further downside risks.

Rahul Kalantri, VP Commodities at Mehta Equities, emphasized keeping an eye on crude oil’s volatility. “If Middle East tensions escalate further, especially if oil infrastructure is targeted, crude prices could surge even higher,” he warned.

Aakhir Tak Editor-in-Chief

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