India’s benchmark indices experienced a significant downturn on Friday, capping their steepest weekly decline since June 2022. The Sensex and Nifty both recorded weekly drops of around 4.5%, driven by several underlying factors. Global investors reacted to escalating tensions in West Asia, particularly the conflict involving Israel and Iran, which increased the risk of spiking oil prices. Additionally, foreign portfolio investors started pulling funds from India, opting instead to invest in China due to more attractive valuations, which added pressure on the markets.
The Sensex ended the week down 1%, or 809 points, settling at 81,689, while the Nifty fell 0.9%, or 236 points, closing at 25,015. This decline resulted in the market capitalization of BSE-listed companies decreasing by Rs 4.2 trillion to Rs 461 trillion, losing over Rs 16 trillion during the week.
Volatility in the Indian markets surged, with the India VIX rising 7.3% to 14.1. In contrast, Chinese markets saw positive movements; the Hang Seng and Shanghai Composite Index surged 10.2% and 8.1%, respectively, aided by government stimulus measures.
Investor anxiety was exacerbated by fears that a potential Israeli offensive on Iran’s oil facilities might disrupt global crude supply, especially if Iran retaliates by blocking the Strait of Hormuz, a crucial oil transport route. This tension has already pushed Brent crude prices up by 11.6% to $79.1 per barrel.
Market sentiment is expected to remain pessimistic in the near term due to rising crude prices and shifting fund flows towards cheaper markets. On Friday, foreign portfolio investors were net sellers to the tune of Rs 9,897 crore, while domestic institutions bought shares worth Rs 8,905 crore. Throughout the week, net FPI selling reached its highest level in 24 years, marking Rs 37,088 crore, indicating significant market volatility and investor caution.
Original Story https://www.business-standard.com/markets/news/mkts-suffer-worst-week-in-over-2-yrs-west-asia-crisis-weighs-on-sentiment-124100400998_1.html
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