Indian shares fell on Thursday, tracking weakness in Asian peers, after President Donald Trump said the U.S. would hit Iran “extremely hard” in the coming weeks, dimming hopes of a near-term end to the war that has unsettled global markets. The Nifty 50 (.NSEI) was down 1.95% at 22,236.80 and the BSE Sensex shed 1.95% to 71,710.72 as of 9:50 a.m. IST.
Other Asian markets (.MIAPJ0000PUS), dropped 2% after Trump said Washington’s “core strategic objectives” in the Iran war were nearing completion. However, he did not provide a clear outlook on when the conflict would end.
Trump’s comments that the United States would continue to attack Iran intensified geopolitical jitters and drove crude oil prices higher.
“A prolonged disruption in oil/energy flows via the Strait of Hormuz can still keep oil prices elevated longer than we had initially hoped for and the Indian economy is one of the most vulnerable to high energy prices,” said analysts led by Chetan Seth of Nomura.
The brokerage downgraded Indian equities to “neutral” from “overweight”, citing elevated risks to earnings and valuations from higher crude prices.
Small-caps (.NIFSMCP100), and mid-caps (.NIFMDCP100), fell about 3% each and all 16 major sectors declined. Financials (.NIFTYFIN) and banks (.NSEBANK), lost 2.5% each, while the PSU bank index (.NIFTYPSU), dropped 3.1%.
The fall follows tighter forex derivatives rules by the Reserve Bank of India, requiring banks to close contracts in open markets and removing leeway to sell to corporate clients.
The rules are negative for banks as they may lead to higher losses, said Jefferies analysts Prakhar Sharma and Vinayak Agarwal.
The Indian rupee rose sharply in early trading.
Pharma stocks (.NIPHARM), lost 3.75% after reports of Trump administration’s plans to announce tariffs on drugmakers as soon as Thursday.
This report is given by Reuters. The Sen Times holds no responsibility for its content.
FAQs
Why are Indian shares falling following President Trump’s latest comments on Iran?
Indian shares fell nearly 2% on Thursday after President Donald Trump’s vow to hit Iran “extremely hard” dimmed hopes for a near-term end to the regional conflict. The Nifty 50 and BSE Sensex both shed 1.95% in early trading as geopolitical jitters drove crude oil prices higher, directly threatening India’s fiscal stability and corporate earnings.
How are the new RBI forex derivatives rules impacting Indian banking stocks?
New Reserve Bank of India (RBI) rules for forex derivatives are weighing on banking stocks by requiring lenders to close contracts in open markets rather than selling them to corporate clients. Financial experts at Jefferies indicate these tighter regulations remove historical leeway for banks, potentially leading to higher losses and increased volatility within the financial services sector.
Why did Indian pharma stocks crash more than 3% this Thursday?
Indian pharma stocks plunged 3.75% following reports that the Trump administration plans to announce new tariffs on international drugmakers as early as Thursday. This potential trade barrier adds a layer of regulatory risk to an already volatile market, specifically targeting one of India’s most significant export-oriented sectors.
Should investors expect a prolonged downturn in the Indian equity market?
Brokerages suggest a prolonged downturn is possible if core strategic objectives in the Middle East remain unfinished and oil prices stay elevated. With Nomura moving from “overweight” to “neutral,” the shift in institutional sentiment reflects a growing concern that high energy costs will persistently erode the “techno-commercial” advantages of the South Asian market.
