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(Bloomberg) — Indian equities tumbled on Monday, tracking declines across most Asian peers, as escalating conflict in the Middle East dented investor sentiment.
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The NSE Nifty 50 Index slipped as much as 2.1% — the most in more than a month — erasing gains made after the country’s trade deal with the US in February. Engineering major Larsen & Toubro Ltd., Reliance Industries Ltd. and carrier InterGlobe Aviation Ltd. led the losses in the benchmark gauge.
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“Middle east escalation draws rising oil risk for Indian markets,” JM Financial Ltd. strategists including Venkatesh Balasubramaniam wrote in a note, citing likely pressure on shares of oil marketing companies, paints, aviation and chemicals as they may face margin pressure from higher input costs.
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Given India’s dependence on imports for most of its energy needs, rising oil prices can significantly widen the trade deficit and weigh on the rupee and equities. A $1 increase in crude prices raises India’s annual import bill by about $2 billion, putting pressure on the trade balance, the JM Financial strategists said.
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The Middle East conflict is the latest setback for India’s $5.1 trillion equity market, which has lagged most major peers since late 2024, partly due to weaker earnings growth. Lower exposure to artificial intelligence-related stocks, compared with markets such as China, South Korea and Taiwan, also contributed to the underperformance.
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While local stocks saw some gains following India’s much-awaited trade agreement with the US on Feb. 2, a relentless selloff in information technology shares has continued to weigh on investor sentiment.
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“Impact on India is typically magnified as higher crude oil prices widen the current account deficit, stoke domestic inflation, pressure the rupee,” said Nachiketa Sawrikar, a fund Manager with Artha Bharat Global Multiplier Fund. This could also lead to foreign outflows as “global investors reduce risk exposure.”
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