Sensex drops over 200 points, Nifty tests 23,600 as Strait of Hormuz tensions rattle oil markets

The Indian stock market opened in the red on Friday as oil prices inched higher amid concerns over the potential closure of the Strait of Hormuz. Iran has suggested banning vessels deemed hostile from the strait and imposing heavy fines on those that violate the proposed rules.

Sensex fell over 200 points to slip below the 78,700 level, while Nifty50 traded near 24,600. Broader markets also slipped into the red, with Nifty Midcap 100 and Nifty Smallcap 100 indices being down with marginal losses.

Bajaj Finance shares dropped around 5% to lead losses on the Sensex, while Bajaj Finserv shares fell over 3% to follow. ICICI Bank shares dropped nearly 2% while Trent shares fell more than 1%. Bharti Airtel, Eternal and Maruti Suzuki shares meanwhile fell around 1% each. Bucking the trend, IT stocks TCS and Tech Mahindra gained 1-2%.

Nearly all sectoral indices opened in the red, with Nifty Financial Services falling nearly 1%. The overall market breadth was still slightly positive, with NSE seeing 1,297 advances against 1,042 declines, while 154 stocks remained unchanged.

Concerns around Strait of Hormuz reopening plans mount

Iran reviewed ⁠a bill ⁠to ban US and Israeli vessels from the Strait of Hormuz, where nearly a fifth of the world’s oil and liquefied natural gas is transmitted before the war began at the end of February. As a result, oil prices inched higher. Brent crude futures were trading above $83 per barrel, while WTI Crude futures were up near $78 per barrel.

Iran is seeking fees of ‌ between 5% and 7% of the price of cargoes from ships using the strait, according to the senior Iranian official cited by Reuters. Oman is discussing fees of around 3%, while US wants no fees at all. These developments are further clouding hopes for a peace agreement between the parties, spooking investors.

What lies ahead for Dalal Street?
The market is consolidating and slowly inching up, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments, adding that this trend is likely to continue in the near-term, preparing for an eventual breakout on the upside.

There are some key takeaways from the Q1 results that investors should keep in mind, according to the analyst. One, most companies in sectors like financials, automobiles, pharmaceuticals, and telecom have delivered double-digit revenue and profit growth rates. This has imparted resilience to their stock prices. Two, IT continued to face headwinds from sluggish growth and concerns surrounding the AI impact on the sector. Three, in commodities like metals and oil, it has been a mixed bag.

“Going forward, financials, automobiles, telecom and capital goods are likely to maintain the growth momentum. The broader market has delivered superior growth, but the elevated valuations will constrain their upward momentum,” Vijayakumar further said.

Technical view on Nifty
Despite a supportive bullish continuation pattern, yesterday’s lacklustre trades have put the prospects of Nifty’s anticipated breakout move under doubt, said Anand James, Chief Market Strategist at Geojit Investments. “We will wait for a breach of 24,775 to play directional upsides, while brief spikes are expected to be challenged near 24,650-24,690-24,730,” he added.

Meanwhile, Nifty’s inability to clear these hurdles, or to float above 24,570, could expose 24,400, according to the analyst.

(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)