Indian markets drop 2% despite Trump's Iran de-escalation remarks

Indian markets dropped over 2% despite Trump's comments on de-escalating the Iran conflict. While this raised hopes, experts cited concerns over rising crude prices, a weakening rupee, and persistent volatility, advising investors to stay put.

Indian equity markets exhibited a cautious yet positive trend after US President Donald Trump indicated that the conflict involving Iran could see a scaling down over the next two to three weeks, raising hopes of easing geopolitical tensions.The BSE Sensex and NSE Nifty both dropped over two per cent within minutes of the opening bell, erasing gains from the previous session's relief rally.

Expert Commentary on Market Volatility

Market participants said Trump's remarks around reducing aggression and a possible withdrawal supported investor sentiment, though volatility persisted.Geojit Financial Services Senior-Vice-President Gaurang Shah told ANI on Thursday morning, before the opening of Indian markets, "I think the positivity in terms of what President Trump mentioned in terms of scaling down of aggression and withdrawal... the markets did take it positively and that reflected in the market's behaviour yesterday."However, he noted that gains were not as strong as expected, adding, "The level at which we opened up and the level at which we closed yesterday was lower than what was anticipated."

Economic Headwinds: Crude Oil and Rupee Concerns

Following Trump's statement, Brent and WTI crude oil prices moved higher amid concerns over supply disruptions and infrastructure damage in the conflict-hit region.Shah said, "There is a sizable amount of damage... to recreate those infrastructures... that's going to take time." He further highlighted concerns for India, stating, "The problem is not only with rising crude prices and LNG prices. The problem is also with a depreciating rupee against the dollar."

Sector-Specific Impact

The market reaction was mixed across sectors. Oil & Gas stocks gained on higher crude prices, while aviation and paint companies faced pressure due to rising input costs. IT stocks saw some support from a weaker rupee, FMCG and consumption stocks remained subdued amid inflation concerns and auto and logistics sectors traded with a negative bias.Shah noted, "This may have some amount of impact... on all those sectors which are dependent on crude derivatives."

Investment Strategy and Forward Outlook

According to Shah, markets have already corrected significantly, creating room for recovery. He said, "Markets have corrected more than 15%... some bit of revival or a sign of relief could be seen either next week, or the week after that."Advising investors to stay invested, he added, "I have not stopped my SIP... markets have given you an opportunity... This is the time to build portfolios."On key triggers ahead, Shah said the market will closely track weekend geopolitical developments, movement in crude oil prices, rupee trajectory against the US dollar, and Q4 earnings season beginning April 10. Shah added that if crude prices cool and the rupee stabilises, earnings could provide a "silver lining" despite current uncertainties.

Geopolitical Skepticism and Economic Strategy

Anindya Banerjee, Head of Research for Currency and Commodities at Kotak Securities, told ANI that the timeline provided in the address required scrutiny. "Donald Trump's speech, if we honestly dissect it, there is nothing new in it because in the same statement he has said that we are close to our objectives. And at the same time, he has said we are going to continue. Now two to three weeks is something which we have to take with a large sack full of salt because honestly, timelines are not something which is in his hands completely," Banerjee said.The broader economic outlook for India remained contingent on the stabilization of energy supplies. Banerjee suggested that the most effective strategy for the current period was to ensure the supply of raw materials and wait for the geopolitical tension to subside. "The best one can do who is well-positioned is to hunker down. That's all we can do because the government is taking all the adequate steps to ensure that the supply of energy is there, the supply of the raw materials is there, because that's all one can do," Banerjee said.

Market Performance

At the time of filing, the BSE Sensex stood at 71,661.61 points, down by 1472.71 or 2.01 per cent, and the NSE Nifty 50 stood at 22,215.90 points, down by 463.50 or 2.04 per cent. (ANI)(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)