Sensex, Nifty trade lower as Israel-Iran tensions keep investors on edge

Indian equity benchmarks were trading lower on Wednesday amid ongoing tensions in West Asia due to the Israel-Iran conflict. Last checked, the benchmark BSE Sensex was trading at 81,552.75, down by 243.4 points or 0.3 per cent, while the Nifty50 was quoting at 24,853.7, down 92.8 points or 0.37 per cent. 

 

The majority of the sectors, except Nifty IT, Media and Realty, were trading in red during the afternoon session. The Nifty Pharma and Healthcare indices emerged as top sectoral laggards down by over 1 per cent each. 

 

Last checked, the Nifty Pharma index was trading 1.2 per cent lower at 21,773 levels, with the constituents including Aurobindo Pharma, Lupin, Granules, and Sun Pharma down over 2 per cent each. Among others, Natco Pharma, Ajanta Pharmaceuticals, Zydus Lifesciences, Cipla, Divi's Labs, Laurus Labs, and Mankind Pharma fell over 1 per cent each. The Nifty Healthcare index also fell around 1.15 per cent.

 

 

Among others, Nifty Auto, Bank, Energy, FMCG, Metal, Consumer Durables and Oil & Gas were also trading under pressure falling up to 1 per cent.  

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However, the broader markets pared early gains to trade lower by the afternoon session. Last checked, the Nifty Midcap 100 index and Nifty Smallcap 100 index were down by 0.14 per cent and 0.22 per cent, respectively. 

 

Devarsh Vakil, head of prime research at HDFC Securities, said that the Middle East situation remains fluid, and markets retain the potential for sudden volatility should tensions escalate further. "This uncertainty was reinforced when US stock index futures declined Monday evening after President Donald Trump issued a stern warning against Iran over the ongoing conflict while stating that Tehran should have pursued a nuclear deal with the United States," he added.

 

Looking ahead, investors will closely watch household spending data and Federal Reserve monetary policy decision this week.   

On the other hand, VK Vijayakumar, chief investment strategist at Geojit Investments believes that markets are unlikely to witness a sharp decline less the Israel-Iran situation worsens.

 

"Despite the escalation of the Iran-Israel conflict globally, stock markets are steady and resilient. The decline in the US volatility index CBOE suggests that markets are unlikely to correct sharply unless the conflict takes a dramatic turn for the worse," he said. 

 

According to Vijayakumar, the main contributor to the market resilience is the retail investors using every dip in the market as a buying opportunity. Valuations do not appear to deter retail investors. Sustained retail funds flows, mainly through SIPs, are empowering the DIIs to buy consistently. Even while exercising some caution, it makes sense to remain invested in this market and to buy the dips.

 

In the last four trading sessions, after the conflict started FIIs sold stocks for ₹8,080 crore. This FII selling has been completely eclipsed by DII buying of ₹19,800 crore.

 

From a technical perspective, Monday's advance was a follow-through candle to the prior day's bullish belt hold and we also finished above a down-gap level, which is bullish behaviour, said  Akshay Chinchalkar, head of research at Axis Securities.

 

"In today's session, resistance can be seen between 25,000 and 25,238 while support lies between 24,750 and 24,800. Global cues are mixed this morning, with Asia up slightly but US index futures in the red," he added.