Sensex and Nifty raised fears of energy crisis as Strait of Hormuz strikes

MUMBAI: Indian equity indices fell 1.7% in roller-coaster trade on Wednesday as a fresh rise in oil prices erased the previous day’s gains in the West Asian conflict. Brent crude futures rose 4% to $91.3 a barrel on Wednesday, recovering from an 11.3% drop the previous day, rekindling concerns about a global energy crisis as ships in the Strait of Hormuz came under attack. Other targets in the region were also targeted throughout the day, as the Gulf War entered its 12th day.

The NSE Nifty ended at 23,866.85, closing 394.75 points or 1.6% lower. The BSE Sensex ended at 76,863.71, down 1.7% or 1,342.27 points. Both indices have fallen more than 2.5% in the past week.

“Iran has signaled it has no plans to surrender and will relinquish control over the Strait of Hormuz, indicating the war is far from over and raising inflation concerns,” said Darmesh Kant, head of research at Cholamandalam Securities.

The fear gauge rises to 21.1
Most sectoral indices ended lower on Wednesday. The Nifty Auto Index fell 3.2% while the Bank Nifty declined 2.1%. The Nifty Private Bank and PSU Bank indices were down 2.4% and 1.8% respectively.

The Volatility Index (VIX) rose from 11.4% to 21.1, indicating that traders expect higher risk in the near term.
Because the war looks like it won’t end soon, investors should prepare for more pain, Kant said.
“Closing trade through the Strait of Hormuz will lead to an increase in crude oil prices, which will ultimately increase the negative impact on the sectors,” he said. “Earnings estimates for FY27 may come down as supply-led inflation hurts corporate profits as well as consumer surplus.”
At home, foreign portfolio investors (FPIs) sold shares worth a net Rs 6,267 crore on Wednesday, while domestic institutional investors bought shares worth Rs 4,966 crore. So far in March, global investors have dumped stocks worth Rs 40,668 crore, the highest in six months.

Vipin Kumar, AVP of Globe Capital Markets, said Tuesday’s pullback was “a dead cat’s ball.”

“A sustained move below 23,800 could push the index to 23,400-23,200 levels while a pullback around 24,300-24,400 levels could attract selling pressure.”

Volatility is expected to be high, he said, and any easing will calm the markets.

The Nifty Midcap 150 index fell 1.1% while the Smallcap 250 index ended 0.4% lower. Over the past week, the mid-cap index declined 0.8% while the small-cap index rose 0.5%.

“A sustained recovery depends on how the war ends and the monsoon forecast for this year,” Kant said. “The lack of any positive stimulus is also keeping the money hot.”

Elsewhere in Asia, Taiwan was led by tech stocks, up 4.1%. Japan and South Korea each gained 1.4%. China rose 0.3%, while Hong Kong declined 0.3%.

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