Khamenei’s death can be seen as a huge development in the ongoing war in the Middle East. This opens a period of uncertainty over Iran’s leadership, and concerns about strong retaliation and rising global tensions.
What can you expect from the markets tomorrow?
Sunny Agrawal, Head of Fundamental Retail Research at SBI Securities, sees the rising geopolitical tensions as a marginal negative for the markets tomorrow and does not expect a knee-jerk reaction. The news surrounding Khamenei’s death and possible retaliation could lead to a small gap in the opening on Monday. “After that, uncertainties should normalize,” he said, adding that crude oil prices will ultimately be the most controllable. If oil prices remain calm, Agrawal doesn’t think markets will react dramatically, and thinks the way markets react longer term will be influenced by more developments in the future.
Kranthi Bathini of Wealth Mills Securities, meanwhile, said no one expected the rising tensions in the Middle East, especially in the UAE. This will therefore have negative consequences for the financial markets in the short to medium term. “But as far as Indian markets are concerned, crude oil performance will remain the most important metric,” he added.
Bathini explained that it is a good thing that India is benefiting from the recent crude oil consolidation. “But if crude oil rises above $80 a barrel, it could create inflationary pressure in the market,” he said.
“So you have to keep an eye on how crude oil will behave in the coming days,” Baithini said, adding that India’s domestic fundamentals remain strong. “The markets are definitely in a recession right now, caused by various reasons. So it will definitely have an impact from the wars in the short to medium term, and not in the long term,” he added.
Manoranjan Sharma, chief economist at Infomerics Ratings, also noted that for India, which is heavily dependent on imported crude oil, the immediate consequence is rising inflationary pressures caused by higher energy prices.”Indian equity markets have already reacted with risk-off sentiment. Benchmark indices are expected to open lower accompanied by increased volatility as investors reassess geopolitical and commodity-related risks. A short-term correction of around 1-1.5% is possible, with sectors such as automotive, financials and FMCG facing downside pressure. IT companies and select export-oriented companies, on the other hand, may find relative support amid global risk aversion and a strengthening US dollar,” it said him.
Nachiketa Sawrikar, fund manager of the Artha Bharat Global Multiplier Fund, explained that equity markets were already vulnerable in February, with the S&P 500 and the Nasdaq Composite in the US falling, and India’s Nifty 50 falling this year. “Against this backdrop, a US-Israel attack on Iran would likely lead to broad selling of risk assets in both developed and emerging markets,” he said.
“We expect the ongoing rally in US Treasuries, oil, gold and silver to continue. For India, the impact is generally larger: higher crude oil prices will widen the current account deficit, fuel domestic inflation, put pressure on the rupee and could lead to FII outflows as global investors reduce risk exposure,” he further said.
What should investors do?
Agrawal explained that 25,000 has been a very strong support for Nifty in the past few months and is expected to remain so in the near term. “If the markets can maintain this level, I don’t see any sharp reaction in the markets,” he said.
Asked which sectors are likely to react most to the uncertainties, the analyst said oil-related stocks will continue to be the focus tomorrow. Shares of oil marketing companies (OMCs) may see some decline, while oil refiners may see a rise in stock prices if oil prices rise. Paint, tires and other stocks will also be central.
Investors should use any dip due to the uncertainties as an opportunity to accumulate, Bathini said meanwhile. “When the war between Russia and Ukraine started, the Nifty 50 fell below 22,000. But after a few years, the markets ignored this factor and recovered,” he added.
The analyst further said that as long as Indian trade is not disrupted, the stock markets will recover the losses after some time, he further said.
“Overall, markets remain highly sensitive to geopolitical risks and sector-specific pressures, driving investors towards defensive, domestically focused segments,” said Vinod Nair, head of research at Geojit Investments Limited.
Indian stock markets fell sharply to close at nearly a month’s low on Friday, with Sensex falling nearly 1,000 points and Nifty closing below 25,200 points. The sell-off wiped out more than Rs 5 lakh crore of investors’ wealth, reducing the total market capitalization of all companies listed on the BSE to around Rs 463 lakh crore.
India’s benchmark indices extended losses for the second consecutive session, led by decline in real estate, financial, auto and FMCG stocks due to multiple factors. Sensex fell over 961 points to 81,287, while Nifty 50 fell around 318 points to 25,179. Notably, Friday marked the first time since February 2 when Sensex closed below the 82,000 mark and Nifty 50 closed below the Rs 25,200 mark.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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