New Delhi: India’s benchmark stock market indices Sensex and Nifty have closed in red for the last four trading sessions straight. As per Friday’s trading price at 12 pm, both the market gauges are down by more than 3% in the last five days. Albeit, the indices showed resilience in the afternoon trade on Friday and traded flat. But nevertheless, in sessions before that, markets have seen bloodshed recently due to reasons which are plenty. The most prominent one being the fresh tension between Iran and Israel.
Bent Crude Prices Up 10% In Last Five Days
Israel’s latest warning pertaining to retaliatory strikes on Iran’s oil and gas infrastructure has set the crude oil prices on the boil. In last five days, global oil benchmark Bent Crude prices have shot up around 10%. At the time of writing this article, its prices hovered near $77.49 per barrel. In as many days, markets have tumbled and oil prices have gone up. These two have followed trajectories in opposite directions.
How Rise In Crude Oil Prices Weight On India’s Stock Market?
India meets 85% oil demand from imports. Crude oil is imported in containers through vessels which sail on the Red Sea route. Repeated attack from terrorist group Houthis on these vessels have made import difficult. Many traders are now looking for alternative routes which are longer which means higher transportation cost. If import of crude oil vessels are impacted it will lead to supply shortage. This will in turn force the Oil Marketing Companies (OMCs) to raise mobility fuel prices. Petrol and diesel prices will rise and transporation inflation will balloon up.
Plus, lot of commodities and raw materials used in manufacturing of many other products used in India are also imported on vessels through the Red Sea route. Surge in international petroleum prices will lead to higher import prices of such products because of costlier transportation expenses. This will further fuel domestic inflation. Rise in prices of goods and services in the country never auger well for the economy. A country’s stock market is a reflection of its economic performance. Dent in GDP growth will impact share prices of companies. And this is exactly what has happened with the domestic market gauges in recent past. In anticipation of imported inflation, the market indices have tumbled!
