The headline indices Sensex and Nifty plunged on Tuesday on the back of soaring crude oil prices, following a recent drone attack on Saudi Arabia’s largest oil processing facility. The Sensex plunged 642.22 points or 1.73 per cent to end at 36,481.09, while the broader Nifty 50 eroded gains made in 2019, and turned negative for the year. The Nifty settled 185.90 points or 1.69% lower at 10,817.60. Investors were spooked as the attack on the world’s largest oil processing facility in Saudi Arabia has led to a record surge in global crude prices. After soaring as much as 20% to USD 71.95 per barrel on Monday, Brent crude futures receded from highs to USD 67.97 per barrel on Tuesday. On Saturday, a drone attack on an oil processing facility effectively knocked out over half of Saudi Arabia’s production as it cut 5.7 million barrels per day or over 5% of the world’s supply. Yesterday, Brent crude gained as much as 19.5 per cent to USD 71.95 per barrel – the biggest gain in dollar terms since futures started trading in 1988.
In the Sensex pack, Hero MotoCorp, Tata Motors, Axis Bank, Tata Steel, Maruti and SBI were among the biggest losers ending up to 6.2% lower. On the other hand, HUL, Asian Paints and Infosys were the only Sensex scrips to end in the green. Notably, the Sensex and Nifty have slumped to a two-week low. Nifty Bank too turned negative for the year.
Taking stock of the dismal session, Ajit Mishra Vice President, Research, Religare Broking said that the sharp rise in crude oil prices has impacted domestic sentiments due to India’s high dependence on imports. “Going forward, market participants would keep a close watch on geo-political developments as any further escalation would have an adverse impact on markets and economy. Apart from this, the FOMC meet outcome would also be on investors’ radar as there is expectation of a rate cut,” he said.
According to the expert, commentary on growth and rate outlook would be a key factor to watch out for. On the domestic front, the recent measures announcement are positive, but it failed to lift market sentiments, he added. According to Shrikant S. Chouhan, Senior Vice-President, Equity Technical Research, Kotak Securities, Nifty has broken equilibrium level at 10,930 and closed at the lower boundary of the channel. “Below 10740, Nifty would enter in quick retracement towards 10,637. On Wednesday, global markets may trade sideways on the back of the outcome from the Fed meeting on rate cut,” he added.