Oil concerns douse market fire

Written by fe Bureau | Mumbai | Updated: Jun 21 2014, 14:35pm hrs
SensexSensex slips 96 points & Nifty 29 points as Crude rises on Iraq tension; weak monsoon fear weighs. (Reuters)
Benchmark indices ended at a two-week low on Friday as tensions between militants and government forces escalated in Iraq. The 50-unit CNX Nifty slipped near the 7,500-mark. The BSE benchmark Sensex ended second straight week in the red with negative returns of 0.48%.

On Friday, foreign institutional investors (FIIs) sold $36.66 million worth of shares, according to provisional data on the exchanges. Meanwhile, the domestic institutional investors (DIIs) bought $12.27 million worth of shares. In YTD, the FIIs have purchased $9.8 billion worth of shares.

On Friday, the 30-share BSE Sensex ended lower by 96.29 points or 0.38% to 25,105.51 points, while the broader 50-share Nifty declined 29.25 points or 0.39% to close at 7,511.45 points. On Wednesday, militants in Iraq attacked Baiji oil refinery. The turmoil in Iraq has led to a sharp spurt in crude prices. The Brent Crude is currently trading at $114.70/barrel which is 4.84% higher than the prices it was trading at in beginning of June.

The rise in prices of crude has a spillover effect on the Indian currency as India is one of the major importers of Iraqi oil. The rupee has already corrected 0.69% against the dollar in the week. Experts believe India may have to start importing oil from Iran if the situation worsens in Iraq. An eventual decline in Iraqi exports would put pressure on China and India to increase their imports of Iranian oil again, weakening the US government's position in negotiations with Tehran over nuclear policies, Motilal Oswal Financial Services said in a recent report.

The market fall was led by declines in M&M, which fell over 2.8% on concerns of a weak monsoon that could hit the companys tractor sales. The Tata Power and Hindalco Industries scrips ended 2.7% and 2.2% lower on BSE.

It was a dismal week, with the benchmark indices retreating for four out of five sessions and Sensex ending lower by 0.48%, or 122.66 points. On Monday, the slipped marginally as the wholesale price index (WPI) inflation touched a 5-month high of 6.01%. On Tuesday, markets rallied 1.31% or 330.71 points. However, the situation in Iraq kept markets in the red upto the end of the week.

Among its peers, most of the Asian markets edged lower on Friday. The Nikkei 225 slipped 0.08%. Kospi (-1.2%), Straits Times (-0.31%), Jakarta Composite (-0.34%) and Taiwan Taiex (-0.46%) were among the losers. Meanwhile, the Shanghai Composite (0.15%) and Hang Seng (0.11%) ended marginally in the green.

Back home, 23 of the 30 Sensex stocks ended in the red on Friday. In the broader market, breadth was weak with 1,720 stocks traded on BSE ending lower compared with 1,250 advances. Most of the 13 BSE sectoral indices ended in the red. The BSE Healthcare (-0.95%), BSE Auto (-0.91%) and BSE Capital Goods (-0.84%) were among the major losers.

The Budget is likely to provide the next big trigger for the market. The market is also likely to monitor the situation in Iraq. The cash turnover on the NSE on Friday stood at R16,064.94 crore, while the turnover in the F&O segment stood at R2.08 lakh crore.