India shares flat; US-Iran conflict pressures rupee, financials
Escalating US-Iran military tensions stalled Indian equities, weakening the rupee and triggering a shift away from financial stocks on fears of renewed global inflation.
Indian benchmark indices closed effectively unchanged on Thursday as rising geopolitical risks overshadowed early session gains. The Sensex added a single point to close at 77,186.87, while the Nifty 50 fell 6 points to settle at 24,072.75. Profit booking in the second half of the session erased the day's initial momentum, leaving 29 of the 50 Nifty stocks in the red.
The stagnation reflects broader investor anxiety over an intensifying conflict between the US and Iran. US President Donald Trump reportedly threatened to expand strikes to Iranian power plants and bridges unless negotiations resume, following discussions between US and Israeli defence chiefs. This escalation kept Brent crude near $85 per barrel and pushed the Indian rupee down 11 paise to 96.36 against the dollar, reviving market expectations for aggressive global rate hikes as central banks brace for inflationary pressure from energy costs.
Major European indices were already trading down up to 0.50% at the time of the Indian close, compounding the weak sentiment and prompting a clear sector rotation. Financial stocks bore the brunt of the selling, with the Nifty Financial Services index dropping 0.51% and the Bank Nifty falling 0.30%. Heavyweight losses in HDFC Bank, Bajaj Finserv, Eternal, SBI Life, and Reliance offset gains in Bajaj Finance, ITC, and Mahindra and Mahindra.
Investors simultaneously sought relative safety in technology, media, and consumer-facing sectors, pushing the Nifty IT index up 0.67%, Media up 1.18%, and Consumer Durables up 1.48%. Auto and FMCG also rose 0.46% and 0.25% respectively, with HCL Technologies, Wipro, and InterGlobe Aviation featuring among the top gainers. The broader market underperformed, with the Nifty Midcap 100 dropping 0.41%, the Smallcap 100 falling 0.10%, and the Nifty Realty index declining 1%.
"Indian equities concluded largely subdued as investors remained cautious amid geopolitical uncertainties, fluctuating oil prices, and weak Asian market trends," Vinod Nair, Head of Research, Geojit Investments, noted. "Going forward, corporate earnings and management commentary, along with progress in monsoons, will be key catalysts, while global and inflation-related developments continue to influence market momentum."
