Indian shares suffered their worst fall in a month on Monday, closing at nearly one-year lows, as a surge in crude oil prices sparked concerns over growth and inflation in Asia’s third-largest economy, which is one of the world’s top oil importers.
Higher crude prices pose a significant challenge for India, the world’s third-largest oil importer, as they could raise inflation and amplify pressure on the rupee, which slumped to a record low against the U.S. dollar.
Oil prices jumped as much as 28.9% to their highest since mid-2022 as the Iran war dragged on and Tehran named Mojtaba Khamenei as successor to his father, Ali Khamenei, in a move seen as a direct rebuke to U.S. President Donald Trump.
India’s blue-chip Nifty 50 index slid 1.73% to a 10-month closing low of 24,028.05 with a volatility measure surging to a 21-month high.
The BSE Sensex shed 1.71% to an 11-month low of 77,566.16, settling very close to confirming a correction from its record closing high in December last year. The benchmarks have fallen about 4.6% since the start of the Iran war.
Other Asian stocks declined and Wall Street futures slid as inflationary shock from the oil spike threatens to push up interest rates worldwide.
READ MORE: Indian shares log worst week in over a year as Mideast war lifts crude, dents risk appetite
“This war is different from the Ukraine war as it impacts all major economies in one stretch and quite badly so,” said G Chokkalingam, founder and head of research at Equinomics Research.
“Time is running out for finding a compromise and it’s a very difficult situation for markets as there is panic selling on concerns that higher crude prices will pile the pressure on currency, trade deficit and budget deficits…”
Foreign investors pulled out $2.4 billion from Indian shares last week, according to provisional exchange data.
Broad-based losses
Fifteen of the 16 major sectors fell, while the broader small-caps and mid-caps lost about 2.2% and 2%, respectively.
State-run oil refiners Indian Oil, Bharat Petroleum and Hindustan Petroleum fell between 4.4% and 6.2% as surging crude squeezes their marketing margins.
Government-owned lenders slid 4% on fears that the oil shock would keep interest rates higher, hurting treasury income. Top private lenders HDFC Bank and ICICI Bank dropped 1.9% and 2.7%, respectively.
Shares of India’s top airline IndiGo sank 3.8% on worries that higher fuel costs and a hit to international air traffic would dent earnings.
Infrastructure major Larsen & Toubro, which has a significant exposure to the Middle East, lost 2.7%, after a 7.7% fall last week.
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