Israel-Hamas War: How Will It Impact Indian Stock Market?

Indian stock market opened significantly lower on Monday, in line with other global stock indices, after Israel witnessed a surprise multifront attack by land, air, and sea by Palestinian militant group Hamas, killing over 1,000 people. This development has raised geopolitical tensions along with a surge in crude oil prices and volatility in global stock markets.

Equity benchmark BSE Sensex fell over 337 points or 0.51 per cent to 65,656.71 and the NSE Nifty fell over 100 points or 0.52 per cent to 19,552.20 on Monday.

According to analysts, there is no immediate reason for panic, but the situation is being closely watched as any escalation of the war could significantly impact Indian stock markets because of a rise in oil prices and increased volatility in rupee and bond yields.

Israel's benchmark TA-35 Index, tracking 35 top companies on the Tel Aviv Stock Exchange, tanked 6.47 per cent on Sunday.

Palka Arora Chopra, Director at Master Capital Services Ltd said the increasing geopolitical risk could lead to a rise in oil prices, and higher volatility can be expected. This can have a significant and long-term impact on oil markets, as there can be a sustained reduction in oil supplies.

Santosh Meena, Head of Research at Swastika Investmart, said the ongoing conflict in Israel is an unforeseen event impacting the market, and its effect may take some time to be fully absorbed. It is crucial to watch the situation closely, especially regarding the potential involvement of other countries like Iran. The possibility of a third front involving Iran is a significant concern as it could trigger a sharp increase in crude oil prices.

“From a technical standpoint, the 19300–19250 range is a critical demand zone. Until the market stabilises within this range, it's likely to remain in a sideways pattern, facing a notable obstacle at 19800. A breach below 19250 could lead to a healthy correction, potentially reaching the 18800 level,” Meena said.

He advised short-term traders to exercise caution and not rush into trades. While a substantial correction could be an excellent buying opportunity for long-term investors.

The US WTI crude oil price jumped 5.1 per cent to $87.02 per barrel. Brent crude futures rose over 5 per cent to $44.76 per barrel earlier today.

“Surging crude oil could impact domestic inflation and see interest rates at an elevated level for a prolonged period. FIIs are continuously selling due to higher bond yields, and high crude oil prices could add more issues. One should keep an eye on the nature of the war, as its longevity could have a strong impact,” Arora said.

In the stock market, sectors like paint and chemicals need to be closely monitored as they will impact their margins in the short to medium term, she added.

According to Anita Gandhi of Arihant Capital, the surprise Hamas attack has put Israel-related stocks in the spotlight globally. Companies like Dr. Reddy’s, Lupin, Torrent, and Sun Pharma, which own a significant stake in Israel’s Taro Pharmaceutical, may experience market fluctuations. Additionally, entities like NMDC, Kalyan Jewellers, TCS, Infosys, Tech Mahindra, and Wipro, with operations in Israel, could see impacts on their market performance.

Shares of Sun Pharma were 0.30 per cent down at Rs 1,123.90; Lupin was down 0.51 per cent on the NSE while Torrent Pharma was up 0.36 per cent and Dr Reddy’s was up by 1.51 per cent.

Due to these developments, the market has witnessed a state of panic, leading to a significant surge in the demand for safe-haven products. The rise in demand has caused a significant jump in the prices of various commodities during the morning trading session.

Sarvjeet Virk, Co-founder & MD at Finvasia said, during geopolitical turmoil, investors tend to make a safer choices and gravitate towards precious metals. At the same time, they do not abandon equities either, as they expect them to perform better once stability returns.

From an Indian market perspective, economic growth remains robust. Investors may view any market dip as an opportunity.