Amid fears of an escalation in US-Iran tensions, Indian equities, as well as the currency, registered a sharp fall in opening trade on Monday tracking a global selloff. While the equity markets snapped gains made in the previous sessions, the Indian Rupee lost ground against the Dollar.
Bombay Stock Exchange’s Sensex, the thirty share index, fell over 600 points, breaching the 41,000 mark. Nifty tumbled to 12,040. The Indian rupee also went past the 72 mark against the US Dollar as crude oil prices went up. In opening trade, the Indian currency fell to 72.10 against the Dollar compared with the previous close of 71.80.
“A major escalation in Middle East tension post the military strikes is a matter of concern. It has fuelled the rally in oil and in precious metals. It would also weaken our domestic currency, which closed at 71.80 on Friday. Equity markets never like uncertainties and it would result in weakness in the short term,” said Ashish Nanda, business head, commodities and currency business at Kotak Securities, a major equity consultant.
With Brent crude surging past the $70/bbl mark after the US air strike killing the Iranian General, India’s state-run oil marketing companies have increased the prices. Prices of both petrol and diesel in India have also surged.
Iraq, Kuwait, and Saudi Arabia are the key Middle Eastern nations from where India imports crude oil. In 2018-19, Iraq topped the Indian crude supplies from the Middle East, leaving behind Saudi Arabia. Iraq getting caught in the US-Iran conflict may lead to inflation flaring up in India.
On 3 January, the US carried out a drone strike on Baghdad International Airport, killing Qasem Soleimani, commander of the elite al-Quds force of the Islamic Revolutionary Guard Corps (IRGC), Iraqi militia commander Abu Mahdi al-Muhandis and 10 other people. Iranian authorities have pledged to avenge Soleimani's killing, blasting it as an act of international terrorism.