The Indian markets on Tuesday fell 300 points intra-day, amid attacks on Saudi Arabia’s oil facilities over increased tension in West Asia during the weekend.
At 12.04pm, the benchmark Sensex fell 0.79% to 36,830.99, while the Nifty 50 was down 0.8% to 10,916 points.
According to Nomura Research, every $10 rise in per barrel of oil prices will reduce GDP growth by around 0.2 percentage point, widen the current account deficit by 0.4% of GDP, widen the fiscal deficit by 0.1% of GDP and add 30 basis points to headline CPI inflation.
Additionally, if higher oil prices result in the rupee’s depreciation against dollar, then according to estimates, every 5% could add a further 20 basis points to the headline inflation trajectory. Nevertheless, we do not see a significant breach of the 4% medium-term target for headline inflation due to this escalation, Nomura research added.
Investors will await Federal Reserve’s policy meeting which will start on Wednesday. The central bank is poised to cut interest rates for the second time this year as policymakers try to get ahead of economic risks emanating from a global slowdown and US President Donald Trump’s trade war.
According to CR Forex Advisors, the Fed meeting on Wednesday, where a rate cut of 25 basis points is highly anticipated, shall remain a key event to watch. If the central bank sounds more dovish than expected due to elevated geopolitical risk, global markets may switch back to safe haven assets, dumping equities.
Shares of MMTC Ltd fell 16%, and State Trading Corp of India Ltd slipped 16% following media reports that the government was likely to shut the two state-owned trading firms along with another public sector unit PEC Ltd.
CG Power rose 5% after private equity giant KKR India on Monday picked up nearly 10% stake in the company for over ₹89 crore by enforcing pledge on credit facilities extended to a promoter firm of the crisis-hit company.