India’s equity benchmarks inched lower on Monday, tracking Asian peers, as investors assessed the likelihood of Iran’s response to the United States’ bombing of its nuclear sites.
The indexes pared some losses as Brent crude oil futures retreated below $77 per barrel, after hitting a five-month high earlier.
The Nifty 50 closed 0.56% lower at 24,971.9 and the BSE Sensex fell 0.62% to 81,896.79, after trading as much as 1.1% lower earlier in the session.
The U.S. index futures too recovered, while the MSCI Asia ex Japan was down 0.8%, trimming some losses.
Higher crude oil prices are a negative for India, which depends heavily on imports for its energy requirements, as they could stoke inflation and widen the fiscal deficit.
“Most of the market is not buying the argument that Iran would be able to take control of the Strait (of Hormuz) and block oil exports. Moreover, Iran also gets a substantial chunk of its own imports through that route,” said Arun Malhotra, fund manager at CapGrow Capital.
Investors are worried that Iran’s retaliation to the United States’ attacks on its nuclear facilities may include closure of the Strait of Hormuz, through which roughly a fifth of global crude supply flows.
Indian stocks set to slip after US attack on Iran’s nuclear sites
However, most analysts and brokerage firms, including UBS, said they do not expect a prolonged supply disruption.
Information technology stocks, which get a significant chunk of revenue from the U.S., shed 1.5% after Accenture posted decline in outsourcing orders due to a cutback in U.S. government spending and tariff uncertainty.
The broader, more domestically-focused mid-caps and small-caps added 0.4% and 0.7%, respectively, partly driven by gains in shipping and defence companies.
Bharat Electronics rose 3.1%, and was among top three Nifty gainers, on securing orders worth 5.85 billion rupees ($67.6 million).
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