2 days ago
Crude Nears $100, Sending Rupee and Indian Stocks Lower
Oil became much more expensive and moved close to $100 a barrel.
This worried investors because India imports a lot of oil.
Higher import costs can put pressure on prices and the country’s trade bill.
The Indian rupee weakened against the US dollar.
The Reserve Bank of India was thought to have sold dollars to reduce sudden movements in the rupee.
Major stock-market indexes also fell as investors became cautious about tensions between the United States and Iran.
However, mid-cap and small-cap shares rose.
Some analysts said these smaller-company shares have benefited from renewed domestic investment and bargain buying.
Crude oil rose as high as $99.5 a barrel before easing to around $98, its highest level in six weeks.
The rupee fell 34 paise to 94.82 per dollar, ending a week-long rally.
The Reserve Bank of India was believed to have sold dollars to limit currency volatility.
The Sensex dropped 555.23 points and the Nifty fell 144.05 points, reaching their lowest levels since June 12.
Mid-cap and small-cap stocks gained despite broader weakness, with the BSE Smallcap index reaching a record closing high.
- Who
- The Indian rupee, Indian stock-market investors, the Reserve Bank of India, and companies listed on Indian exchanges were affected.
- What
- A rise in crude oil prices weakened the rupee and pushed major Indian equity indexes lower, while mid-cap and small-cap indexes gained.
- Where
- Indian financial markets, including the currency market and the Bombay Stock Exchange and National Stock Exchange benchmarks.
- When
- Tuesday.
- Why
- Crude oil approached $100 a barrel amid heightened United States-Iran tensions, while a stronger dollar increased pressure on the rupee and equities.
Downside Risks
Resilience and Support
Rupee outlook
Downside Risks
Analysts warned that sustained high crude prices and a stronger dollar could push the rupee below 95.
Resilience and Support
The Reserve Bank of India was expected to support the currency using its foreign-exchange reserves and market intervention.
Equity-market prospects
Downside Risks
Geopolitical tensions, elevated oil prices and risk aversion led to selling in banking, information technology, oil and gas, and realty shares.
Resilience and Support
Mid-cap and small-cap stocks continued to gain, supported by domestic inflows and value buying as earnings-downgrade concerns eased.
Key facts
- Rupee close
- 94.82 per US dollar, down 34 paise
- Crude oil peak
- $99.5 a barrel intraday
- Sensex close
- 75,577.58, down 555.23 points or 0.73%
- Nifty close
- 23,635.10, down 144.05 points or 0.61%
- Market low
- Both benchmark indexes closed at their lowest levels since June 12
- Small-cap performance
- BSE Smallcap rose 0.37% to a record closing high of 59,080.20
- Currency outlook
- One analyst expected the rupee to trade between 94.50 and 95.25 in the near term
Quotes
Anil Kumar Bhansali
Head of treasury at Finrex Treasury Advisors LLP
“Renewed hostility between the US and Iran over the past few days has turned investors risk-off towards equity assets. Mirroring the weak global cues, domestic markets extended their losing streak amid selling in banking, IT, oil & gas and realty shares”
financialexpress.com
“Oil prices have moved near $100 a barrel, which has led to the rupee’s decline today. In addition, a strengthening dollar index also weighed on the currency. This has prompted the RBI to intervene to ensure orderly movement in the rupee”
financialexpress.com
Vinod Nair
Head of research at Geojit Investments
“Since the 52-week lows recorded in April for mid-caps and March for small-caps, these segments have delivered strong returns of 20-30%”
financialexpress.com
Sources
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