Sensex declines 495 points over Iran oil concerns; Nifty ends below 11,600

Indian markets posted their worst single-day fall in 2019 as rising oil prices hurt investor sentiment and dampened economic outlook. Brent futures rose as much as 3 per cent to $74.3 a barrel, the most since November 1, before easing off slightly, as the United States appeared to end all waivers issued to eight economies, including India, allowing them to buy Iranian oil without facing sanctions.

The benchmark BSE Sensex fell 495 points, or 1.3 per cent, to end at 38,645 and the Nifty 50 declined 158 points, or 1.4 per cent, to close at 11,594. Both indices fell the most since December 21, 2018.

Fears of widening current account of deficit weighed on the rupee and foreign flows. The rupee ended at 69.67 against the US dollar, compared to Thursday’s close of 69.35. Flows from foreign portfolio investors (FPIs) were seen tapering, while domestic institutional investors (DIIs), too, adopted a cautious stance. On Monday, FPIs net-bought shares worth just Rs 73 crore, while DIIs pulled out Rs 68 crore from domestic equities. 

The yield on the benchmark 10-year government bond ended at 7.47 per cent versus the previous close of 7.42 per cent.

Experts said Washington’s move would hit Asian buyers the hardest. Oil, the biggest import for India, has a bearing on balance of payments, fiscal deficit and inflation. Already, Brent crude prices have jumped nearly 41 per cent this year.     

“Higher oil prices, uncertainty in the political environment and global slowdown are some of the key risks that Indian markets face in the short term,” said Hemang Jani, head — advisory at Sharekhan by BNP Paribas.

So far, investors were paying little heed to the rising oil prices with the benchmark Sensex and the Nifty climbing to record highs last week. However, with oil prices forecast to cross $80 a barrel again, investors are scaling back their risky bets, said experts.

Brent crude is a key input for a lot of companies and therefore, rise in oil prices directly impacts their margins and profitability.

“As a significant importer of crude oil, the high oil price is not good for Indian macros,” said Jagannadham Thunuguntla, head of research, Centrum Wealth.

Oil marketing companies (OMCs) witnessed a sharp sell-off with shares of Indian Oil declining 4 per cent, while that of HPCL and BPCL dropping 6 per cent each.

All BSE sectoral indices, but information technology, ended with losses. The oil and gas index led the decline, dropping 3.2 per cent. Only 6 Sensex members ended with gains. YES Bank and IndusInd Bank fell the most -- 6.6 per cent and 4.1 per cent, respectively. Reliance Industries, HDFC, ICICI Bank and HDFC Bank were the biggest drag on the index. These four stocks alone contributed to over 300 points of Sensex decline. 

The India Vix index, a gauge for market volatility, rose 6.15 per cent to 24.14, a three-year high. Analysts said Vix climbing past 24 levels indicates nervousness among market participants and more volatility ahead.

The weakness in the market comes after two months of stellar gains. In the past two months, the benchmark indices have rallied nearly 10 per cent on the back of over $9 billion inflows from FPIs.

“After the breath-taking rally of the past two months, a correction was due and the oil price surge has triggered it. For the markets to sustain at elevated levels, it’s very important for Indian corporate earnings to remain robust,” said Thunuguntla.