The US’s involvement in the Israel-Iran conflict has rattled Indian equity markets, with the Nifty slipping below the 25,000 mark and the Sensex falling 511.38 points on June 23. The market began the week on a volatile note, affected mainly by escalating geopolitical tensions in the Middle East and weak sentiment in IT heavyweights following subdued guidance from Accenture. On the sectoral front, IT, FMCG, Auto, and Banking sectors saw declines of 0.5-1.5 percent, while Media, Metal, and Capital Goods sectors were up by 0.5-4 percent.
The BSE midcap index rose by 0.2 percent, and the smallcap index added 0.6 percent, showing better resilience amid the overall market drop. Ajit Mishra, SVP, Research at Religare Broking, commented, “The market had a volatile start due to the US’s entry into the Middle East conflict. This geopolitical tension, along with Accenture’s guidance, dampened sentiment early in the session.”
Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, noted that the Nifty showed significant recovery after opening with a downside gap but found strong resistance around the 25,100-25,200 level range.
Prashanth Tapse, Senior Vice President (Research) at Mehta Equities, highlighted that the US’s entry into the Israel-Iran conflict caused panic selling, exacerbated by potential spikes in crude oil prices that affected the local currency and inflation. Going forward, global market performance and crude oil prices will continue to be key factors influencing market movements.
Geopolitical tensions shake Indian markets
Investors are advised to avoid aggressive bets and focus on selective stock picking during this consolidation phase. Indian markets are bracing for heightened volatility and a potential correction as escalating tensions between Iran and Israel weigh heavily on investor sentiment. Experts caution that a sustained rise in crude oil prices could further sour the mood.
Alok Agarwal, head-Quant and Fund Manager at Alchemy Capital Management, said, “The US has long been watchful about Iran’s expanding nuclear programme, with tensions rising especially a couple of years ago when Iran’s uranium enrichment neared 83.7%, close to weapons-grade. This concern has now escalated to direct US military action, making the situation more volatile.”
Aniruddha Sarkar, CIO at Quest Investment Advisors, noted that rising crude prices could widen the current account deficit, fuel inflation, and weaken the rupee due to increased foreign exchange outflows. Higher fuel costs could also prompt foreign institutional investors (FII) to sell in risk-off mode from emerging markets.
Nirmal Bhanwarlal Jain, founder of IIFL Group, suggested that no further retaliation by Iran might actually lead to an upside in the Indian markets. “If Iran doesn’t retaliate in a way that is surprising or nasty, markets could rally as investors reckon the tensions would abate,” he said. Experts recommend staggered investing and remaining vigilant for potential dips that could present buying opportunities if tensions escalate.
