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Published: October 9, 2023
Updated: October 9, 2023

Indian Stock Markets on Edge as Israel-Hamas Conflict Raises Concerns

The Israeli-Hamas conflict, which erupted over the weekend, is sending ripples through global stock markets, including India. While the situation does not warrant immediate panic, Indian stock indices are expected to open lower on Monday. This article examines the potential impact of the conflict on Indian stocks, focusing on factors such as oil prices, rupee volatility, and bond yields.

Stock Markets Await Developments:

Indian stock markets are bracing for a cautious start on Monday, mirroring the global trend. The Israel-Hamas war has introduced an element of uncertainty that investors are closely monitoring. The potential ramifications for Indian stocks lie in the surge in oil prices and increased volatility in currency and bond markets.

Market Reactions in Israel and India:

Israel's TA-35 Index, which tracks 35 leading companies on the Tel Aviv Stock Exchange, plummeted by 6.47% in response to the conflict. Meanwhile, Indian benchmarks, including Nifty and Sensex, were already trading approximately 3% below their mid-September record highs. This decline was attributed in part to foreign institutional investors selling off Indian stocks.

Expert Opinions and Caution:

Market experts urge caution and a wait-and-see approach. They highlight the evolving nature of the situation and advise against preemptive actions. Unlike previous geopolitical events, Arora opts to observe the situation for a few days before making investment decisions.

Oil Price Concerns:

Crude oil prices had corrected by 9% from their year-high last week, following OPEC's decision to maintain output cuts. However, a prolonged and expanding conflict could impact oil prices significantly, especially if a state actor is involved in the orchestrated attacks on Israel.

Volatility and Market Resilience:

Experts anticipate potential volatility in the days ahead. Indian markets are not only affected by the conflict but also by factors like the upcoming earnings season and state elections. Market resilience may depend on how the situation unfolds globally.

Impact on Currency and Exports:

A rise in oil prices could lead to a weaker rupee due to increased outflows of dollars, making exports more expensive. India imports 85% of its crude oil requirements, which exposes it to currency fluctuations.

Foreign Portfolio Investors (FPIs) and Bond Yields:

FPIs had booked profits amid rising US bond yields. A surge in bond yields prompts FPIs to shift funds away from emerging markets like India to safer assets like US treasuries.

Oil Price Predictions:

Analysts expect a short-term oil price increase of around 10-12% due to the knee-jerk reaction to the conflict. Experts also anticipate a lower market opening on Monday but envisions a potential recovery.

As the Israel-Hamas conflict unfolds, Indian stock markets tread cautiously. While immediate panic is unwarranted, the situation's dynamic nature and potential impacts on oil prices, currency, and bond markets necessitate careful observation. The extent of the market's response will depend on the evolving global scenario and developments related to the conflict.