Publication date: 16.04.2024
Due to growing geopolitical unrest in the Middle East, the Indian market saw a 1 percent intraday decline today along with losses in its international counterparts. Following an Israeli raid on its embassy in Syria, Iran unleashed over 300 drones and missiles against Israel over the weekend. The US and other Israel-allied nations have called for moderation in the face of this circumstance. Notably, according to Reuters, US President Joe Biden warned Prime Minister Benjamin Netanyahu that the US will not take part in retaliation against Iran. Experts do not believe that the Middle East war would have a lasting impact on the Indian indices, despite the fact that the Indian market fell today.
Why is the Indian stock market currently down ?
The intensification of the possible conflict between Israel and Iran is a grave development that will probably have a negative effect on oil prices. Short-term pressure will also be applied to the Indian markets. Long-term stability and the robust development trajectory of the Indian economy, however, are still present, according to Anand Rathi Advisors CEO of Investment Banking Samir Bahl. While signs from the crude market suggest that tensions are unlikely to worsen, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, cautions investors in the short term. "A number of negative factors have affected markets today, including the planned modifications to the tax treaty between Mauritius and India, the resurgence of hostilities in the Middle East, and higher-than-expected US inflation. The crude market is sending forth signals that suggest an escalation of the Iran-Israel crisis is unlikely. It is very evident from President Biden's statements that he opposes Israeli response. So, things might get better. Investors must exercise caution, though, as there is a great deal of uncertainty in such a delicate position "the analyst stated.
How should investors proceed ?
The entire world will be watching Israel's and the G7's response. Increased hostilities might cause the price of crude oil to rise, which would raise inflation. In particular at a time when they are not selling cheaply, this lessens the likelihood of a rate decrease and, consequently, the values of stocks, including Indian equities," stated Shrey Jain, founder and CEO of SAS Online, India's Deep Discount Broker. The market players should swiftly reduce the same by selling since this should negatively impact the margins.
Summary
The recent escalation of tensions between Israel and Iran has prompted concerns about its potential impact on global stock markets, including the Indian market. Following an Israeli raid on its embassy in Syria, Iran retaliated with a significant drone and missile strike against Israel, raising geopolitical uncertainties. Despite calls for moderation from US and Israel-allied nations, including a warning from US President Joe Biden against retaliatory actions, the situation remains tense. The Indian stock market experienced a 1 percent intraday decline amidst these developments, reflecting short-term pressures influenced by concerns over potential conflict and its impact on oil prices. However, experts like Anand Rathi Advisors CEO of Investment Banking Samir Bahl and V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasize the resilience of the Indian economy in the long term. While short-term volatility may persist due to factors like the anticipated conflict and other global issues such as changes to the tax treaty between Mauritius and India, the market has already factored in some of these negatives. Investors are advised to proceed cautiously amidst heightened geopolitical tensions. Shrey Jain, founder and CEO of SAS Online, highlights the possibility of increased volatility in equity markets, particularly in India, as the situation unfolds. Rising crude oil prices due to escalated hostilities could impact inflation rates, potentially affecting stock values. Indian exporters may also face challenges such as longer delivery times or levies, prompting swift action to mitigate potential negative impacts on margins. In conclusion, while the Israel-Iran tensions may induce short-term fluctuations in the stock market, investors are encouraged to maintain a long-term perspective and stay informed about developments. Prudent risk management strategies and a watchful approach to market movements are essential in navigating through uncertain times.
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