Sunday, May 19, 2024

Breaking: BSE and Nifty Crash as Geopolitical Crisis Unfolds!

ICICI Bank, Tech Mahindra, Hindustan Unilever Ltd., Tata Consumer Products Ltd., and Shriram Finance Ltd. were the NSE stocks that saw the highest drops in the afternoon trades.


Due to investor risk aversion brought on by the development of the confrontation between Iran and Israel, the domestic benchmark equity indices, the Sensex and Nifty, kept falling on Monday, April 15. Following slow Asian shares, the Nifty 50 and BSE Sensex started getting red. Investor sentiment was also affected by worries about the US Federal Reserve’s delayed cut in interest rates and the recent tax treaty revision between Mauritius and India.

How much has BSE and Nifty declined?

The 30-share Sensex began at 73,315.16, down 1.25 percent, or 930 points, from the closing of 74,244.9 the previous day. The NSE’s Nifty 50 opened at 22,339.05, down 180.35 points, or 0.8%, from the previous close of 22,519.4.

But in the afternoon trades, both indices recovered some of their losses after starting lower. The Nifty was trading at 22,377 and the Sensex was trading at 73,728.5 at 12:45 p.m.

Why has the stock market tanked today?

The tension between Israel and Iran, which escalated on Saturday when the Iranians launched drones and missiles toward Israel in retribution for an Israeli strike on April 1, led to the investor state of mind turning negative on Monday. This has sparked worries about the two countries’ growing conflict.

V K Vijayakumar, the Chief Investment Strategist of Geojit Financial Services said, “There are many headwinds that will weigh on markets today: the renewed conflict in the Middle East, proposed changes in the India-Mauritius tax treaty and the hotter-than-expected US inflation are negatives.”

Because an Iranian counterattack was anticipated and the market underestimated the higher US inflation on Friday, April 12, some of these downsides have already been priced in.

Senior VP (Research), Prashanth Tapse from Mehta Equities Ltd. said, “In the wake of Friday’s trading session, Nifty encountered bearish trends amidst lingering concerns over CPI inflation in the US. Speculation mounted regarding the Fed’s rate-cutting plans for 2024, dampening market sentiment.”

India and Mauritius recently signed a protocol to update their tax treaty to stop treaty misuse related to tax avoidance and evasion. Concerns about increased scrutiny of investments have been raised by the amended treaty’s text, which was signed in March but made public on Wednesday, April 10. As a result, foreign portfolio investors (FPIs) sold off over Rs 8,027 crore worth of stocks on a net basis on Friday in the stock market. Analysts predicted that FPI outflows would probably persist until the Central Board of Direct Taxes (CBDT) provides additional clarification regarding the applicability of benefits under the updated tax treaty.

Today, which stocks have fallen the most?

ICICI Bank, Tech Mahindra, Hindustan Unilever Ltd., Tata Consumer Products Ltd., and Shriram Finance Ltd. were the NSE stocks that saw the highest drops in the afternoon trades.

What is the outlook for the stock market?

The weekend attack by Iran on Israel has caused a new level of anxiety in the markets, and the full impact will depend on how things develop, according to Madan Sabnavis, Chief Economist at Bank of Baroda.

Sabnavis said, “If things remain where they are and there is no retaliation from Israel, then the nervousness should ease in a couple of days’ time and it should be back to normal.”

The US has stated that they will not be intervening directly, while the other G7 countries have denounced the attack but have not said anything more. Since Iran is already under a lot of sanctions, the country’s economic situation cannot significantly change.

As an alternative, Sabnavis suggested that Israel might react gradually to create a sense of surprise, even if it doesn’t happen right away. This is concerning because, even though the situation may escalate to the point where several nations back these two countries, the effects on markets will be severe.

He said, “Hence, markets all over including India will be watching these developments carefully. Hopefully, the present crisis will also pass. But central banks would definitely be concerned and would be monitoring all such developments.”

The Indian Bugle
The Indian Bugle
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