The BSE Sensex dropped over 100 points in the opening session on Friday as global equities turned negative after the US killed a top Iranian general, fuelling fears of a conflict in the oil-rich region.
Brent crude surged 4.4 percent to $69.16 and WTI jumped 4.3 percent to 63.84, a PTI report said.
Crude prices have surged in wake of recent elimination of Iranian Revolutionary Elite Guard's commander Qaseem Soleimani; Brent & Nymex extend gains after multiple Iranian & American agencies have confirmed the developments pic.twitter.com/7NfWD2jopn
— CNBC-TV18 (@CNBCTV18Live) January 3, 2020
The 30-share BSE index was trading 107.35 points or 0.26 percent lower at 41,519.29. Similarly, the broader NSE Nifty slipped 39.10 points or 0.32 percent to 12,243.10.
#CNBCTV18Market | Indian indices open lower; global markets erase early gains in wake of crude prices spiking sharply after a US strike eliminated a top Iranian commander For more LIVE updates, log on to https://t.co/DREZPO7hOm pic.twitter.com/gbuudlQIEt — CNBC-TV18 (@CNBCTV18Live) January 3, 2020
Asian Paints was the top loser in the Sensex pack, shedding up to 1.62 percent, followed by Tata Steel, HDFC Bank, Mahindra and Mahindra, HUL, IndusInd Bank and Maruti.
On the other hand, ONGC was the top gainer, rising up to 2.77 percent. TCS, Infosys, HCL Tech, Tech Mahindra, Sun Pharma and Hero MotoCorp were also trading in the green.
In the previous session, the 30-share gauge ended 320.62 points, or 0.78 percent, higher at 41,626.64. The closed 99.70 points, or 0.82 percent, up at 12,282.20—its new closing record.
Meanwhile, on a net basis, foreign institutional investors bought equities worth Rs 688.76 crore, and domestic institutional investors purchased shares worth Rs 63.95 crore on Thursday, data available with stock exchanges showed.
According to traders, domestic investors followed Asian markets which fell after the Pentagon confirmed that US President Donald Trump ordered the killing of Iran Revolutionary Guards commander Qasem Soleimani, who died in Baghdad "in a decisive defensive action to protect US personnel abroad".
Rupee tanks 24 paise to 71.62
The rupee depreciated by 24 paise to 71.62 in early trade on Friday weighed by the spike in crude oil prices, after US President Donald Trump ordered deadly strike on Iranian commander.
Forex traders said crude oil prices surged after US President Donald Trump ordered the killing of Iran Revolutionary Guards commander Qasem Soleimani
— CNBC-TV18 (@CNBCTV18Live) January 3, 2020
The US had called the strikes in response to a rocket attack days earlier that had killed an American contractor working in Iraq.
At the Interbank Foreign Exchange, the rupee opened on a weak note at 71.56 then fell further to 71.62 against the US dollar, showing a decline of 24 paise over its previous closing.
On Thursday, the rupee had settled at 71.38 against the US dollar.
"General Soleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region. General Soleimani and his Quds Force were responsible for the deaths of hundreds of American and coalition service members and the wounding of thousands more," the Department of Defence said.
The global benchmark, Brent crude oil was trading at USD 68.20 per barrel, higher by 2.94 percent. Besides, muted opening in domestic equities also dragged the local unit.
Asian shares stumble
Asian shares fell on Friday, erasing early gains, while oil prices spiked after US airstrikes in Iraq killed a top Iranian commander, heightening geopolitical tensions.
Iranian Major-General Qassem Soleimani, head of the elite Quds Force and top Iraqi militia commander Abu Mahdi al-Muhandis were killed early on Friday in a US air strike on their convoy at Baghdad airport, the Pentagon said.
MSCI’s broadest index of Asia-Pacific shares outside Japan had touched its highest point since 15 June 2018 in early trade, but fell after reports of the airstrike emerged. It was last down 0.26 percent.
China’s CSI300 index, one of the world’s best-performing indexes last year, also turned negative, losing 0.25 percent. Australian shares were 0.66 percent higher, but that was off earlier highs.
“It remains very unclear exactly what impact (the US strikes) could have on the equity market,” said Tapas Strickland, director of economics and markets at National Australia Bank.
“It is significant that one of Iran’s top military generals was reported to have been taken out ... but it all hinges on what Iran does in terms of retaliation,” he said.
Middle Eastern tensions upset a rally for the MSCI index, which finished at its highest close in more than 18 months on Thursday.
It had been lifted by a New Year’s Day announcement from China’s central bank that it would cut the amount of cash that banks must hold as reserves, releasing around 800 billion yuan ($114.87 billion).
Against the backdrop of a thaw in trade relations between the United States and China, global markets had seen renewed appetite for risk assets.
“You have from both a policy and trade perspective a favourable framework for ... risk assets for the weeks to come,” said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong.
“The issue in our view, and that is the central scenario, is beyond these few weeks - where could we see a further correction?” he said, noting that the United States is unlikely to enjoy further fiscal stimulus before the presidential election in November.
Shares had received further support from data on Thursday showing factory activity in China continued to grow at a solid pace in December, and that business confidence improved.
South Korean factory activity also improved in December, returning to growth after seven straight months of contraction, which analysts saw as a positive sign for global growth.
Markets in Japan remain closed for a national holiday.
Overnight, Wall Street’s major indexes notched record highs in their first session of the decade. The Dow Jones Industrial Average rose 1.16 percent to 28,868.8. The S&P 500 gained 0.84 percent to 3,257.85 and the Nasdaq Composite added 1.33 percent to 9,092.19.
But US stock futures pointed to a grim day on Friday after the airstrikes, with S&P e-minis shedding 0.8 percent.
While equity markets turned lower, oil prices surged on news of Soleimani’s death, with global benchmark Brent crude shooting 3.02 percent higher to $68.25 per barrel and US West Texas Intermediate crude jumping 2.75% to $62.86 per barrel.
News of the strikes came after US Defense Secretary Mark Esper said on Thursday there were indications Iran or forces it backs may be planning additional attacks after Iranian-backed demonstrators hurled rocks at the US embassy in Baghdad following American strikes on Sunday against bases of the Tehran-backed Kataib Hezbollah group.
Esper warned that the “game has changed” and it was possible the United States might have to take preemptive action to protect American lives.
In currency markets, the dollar weakened as investors snapped up safe-haven yen. The greenback fell 0.52% against the Japanese currency to 108.00.
The dollar was flat against the euro at $1.1170.
The dollar index, which tracks the dollar against a basket of six major rivals, was down 0.09 percent at 96.758.
The US strikes in Iraq and a weaker dollar combined to burnish the value of gold, driving the precious metal 0.75 percent higher on the spot market to $1,540.25 per ounce, around four-month highs.
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Updated Date: Jan 03, 2020 10:51:19 IST