global-markets-react-to-geopolitical-tensions

Today's trading session witnessed a dramatic start as the BSE Sensex and Nifty50, took a sharp nosedive before partially recovering.

 

The BSE Sensex plummeted by 800 points, while the Nifty50 hovered dangerously close to the 22,300 mark. At 11:53 AM, the BSE Sensex was trading at 73,713.11, marking a decrease of 532 points or 0.72%. Similarly, the Nifty50 stood at 22,365.85, down by 154 points or 0.68%.

 

The Indian stock markets opened the week on a bearish note, with the trend observed across Asian markets.

 

The primary driver behind this downturn appears to be the escalating tensions between Iran and Israel.

 

Iran's retaliatory drone missile attack on Israel over the weekend has triggered concerns among investors about the possibility of a broader conflict in the region.

 

The repercussions of this geopolitical turmoil were keenly felt in the Indian market, with the total market capitalization of BSE-listed companies witnessing a significant drop of Rs 5 lakh crore to Rs 394.68 lakh crore.

 

Various segments experienced substantial declines at the opening bell. Nifty PSU Bank, Realty, and Media sectors bore the brunt with declines exceeding 2%, while Nifty Auto, Financial, Metal, Pharma, and Oil & Gas sectors faced losses ranging from 1-2%.

 

Why the Plunge?

 

The escalating tensions between Iran and Israel serve as the primary catalyst for today's market downturn. Iran's drone missile attack on Israel, reportedly in retaliation for a suspected Israeli strike on its consulate in Damascus earlier this month, has unnerved investors.

 

The unfortunate loss of seven Iranian Revolutionary Guard Corps personnel, including two generals, in the Israeli strike added fuel to the already simmering tensions.

 

The current market scenario, characterized by an all-time high, has heightened investor caution. According to Kranthi Bathini of WealthMills Securities, "Geopolitical tensions have the potential to trigger a swift market reaction, and we're closely monitoring how the situation unfolds."

 

Global Impact

 

The cautious sentiment reverberated across global markets, with Asian indices experiencing a slump.

 

MSCI's Asia-Pacific shares outside Japan dropped by 0.7%, reflecting investor concerns post-Iran's military actions. Japan's Nikkei witnessed a decline of over 1%, Australia's S&P/ASX 200 index lost 0.6%, and Hong Kong's Hang Seng Index slumped by 0.8%.

 

US Treasury Yields Remain Elevated

 

Meanwhile, in the United States, Treasury yields held firm close to recent highs.

 

Traders recalibrated their expectations concerning the Federal Reserve's rate cut pace and scale for the year.

 

The benchmark 10-year yield stood at 4.5277%, with the two-year yield hovering around 5% at 4.8966%.