Indian stock markets started the week on a soft note Monday, with benchmark indices falling into the red as geopolitical worries mounted.
Uncertainty in the global landscape, particularly in the wake of US airstrikes on Iranian nuclear sites, tainted investor sentiment, prompting fresh selloffs in leadership segments like information technology and automobiles.
By 9:30 am, the BSE Sensex had fallen 677.10 points, or 0.82%, to trade at 81,731.07, and the NSE Nifty was lower by 204.6 points, or 0.81%, at 24,907.75.
Sectoral indexes also reflected the larger downtrend. The Nifty Bank index fell 387.75 points (0.69%) to 55,865.10. The Nifty Midcap 100 declined 219.45 points (0.38%) to 57,776.05, while the Nifty Smallcap 100 shed 45.25 points (0.25%), trading at 18,148.95.
Even though the increased tension after the US attack on three Iranian nuclear facilities, market analysts opine that the longer-term effect can be limited unless there is a drastic escalation.
If Iran hurts and destroys the US defence establishments in the region or injures US military personnel severely, the American response can be massive and this may further escalate the crisis. But as per market analysis, there are boundaries to what Iran can do against US and Israel," said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He also pointed out that it would be damaging to Iran's own economy as well as that of allies such as China if Iran tried to close the Strait of Hormuz and that its enemies would be less so. Consequently, market players are likely to remain with a 'buy on dips' strategy, he said.
Among Sensex members, key decliners in initial trade were Infosys, HCL Tech, Hindustan Unilever, TCS, Asian Paints, Power Grid, Reliance, and ITC. However, the gainers were Bharat Electronics Limited (BEL), Bharti Airtel, and Trent.
On the institutional side, FIIs extended their buying spree for the fourth consecutive session on June 20, buying equities totaling ₹7,940.70 crore. Domestic institutional investors (DIIs), on the other hand, sold equities amounting to ₹3,049.88 crore.
Going forward, the markets might try to recover from the initial fall, says Devarsh Vakil, Head of Prime Research at HDFC Securities.
"We anticipate our markets to react negatively and open lower before trying to recover from these early losses. Near-term resistance is now at 25,222 levels. Support has moved up to 24,800 levels," he said.
In Asia, the tone was still cautious. The markets in Bangkok, Japan, Seoul, Hong Kong, and Jakarta were all in the red. China deviated from the trend, however, and traded in positive terms.
In the US, the last trading session closed on a mixed note. The Dow Jones Industrial Average inched up by 35.16 points (0.08%) to settle at 42,206.82, whereas the S&P 500 lost 13.03 points (0.22%) to 5,967.84. The Nasdaq Composite fell 98.86 points (0.51%) to 19,447.41.
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