Middle East crisis: Markets see volatility as tensions persist

MUMBAI: Conflicting and confusing messages relating to the war in West Asia kept Dalal Street traders busy on Tuesday with hopes of a quick resolution to the crisis in the Gulf stood much diluted compared to what it was on Monday evening. As a result, sensex opened sharply higher but selling soon followed.

In the international markets, crude prices started rising again, which also dampened investor sentiment and the rupee weakened. At the close of a volatile session and aided by a late surge, sensex closed 1,372 points (1.9%) up at 74,068 points. On the NSE, nifty too showed a similar trend and closed 400 points (1.8%) up at 22,912 points.

On Monday evening, after the US president Donald Trump said the US and Iran had started talking and indicated a probable resolution to the conflict in West Asia, markets around the world reacted positively. In India, the GIFT nifty rallied over 3%, rupee strengthened against the dollar and crude oil prices crashed over 10% at one point. However, as doubts about such a move surfaced, markets reacted negatively.

According to Viram Shah, co-founder & CEO, Vested Finance, markets were clearly positioned for escalation, not resolution and the day's moves showed how quickly that pricing can reverse. "What this tells us is simple: Markets are currently trading headlines, not fundamentals. Even a hint of de-escalation is enough to unwind extreme positioning across energy and equities," he said. Shah added that the current global market situation remains fluid, as supply disruptions and uncertainty around the Strait of Hormuz are still unresolved. "For investors, this is a reminder: Markets tend to overshoot both on fear and relief," he said.

In Tuesday's market, foreign funds continued to sell aggressively in the stock market with the net outflow at Rs 8,010 crore, BSE data showed. With this outflow, March's total net selling is at a little over Rs 1.1 lakh crore, a record peak figure for any single month ever.

The day's rally added about Rs 7.5 lakh crore to investors' wealth, with BSE's market capitalisation now at Rs 422.8 lakh crore, official data showed.


Ready to Make a Smarter Property Decision? Build Your Legacy with TOI Homes.