As Global Tension Simmers Down, Markets Recover

While the political drama played out between the US and Iran escalated, the markets lost their grip. However, cooling of tempers has helped stage a comeback

With the US and Iran almost rushing into a war-like scenario, the markets were bound to suffer. However, post the comments made by US President Donald Trump and the face-off between the nations having eased to some extent, the domestic as well as global markets have recovered for now.

With the global indices surging during the fortnight, NASDAQ, S&P 500 and Dow Jones Industrial Average (DJIA) increased by 3.41 per cent, 1.92 per cent and 1.68 per cent respectively. European indices such as DAX registered a positive growth of 1.57 per cent while CAC 40 and FTSE 100 rose by 0.98 per cent and 0.47 per cent respectively. This was in the wake of more clarity regarding Brexit with UK’s lawmakers approving a law to allow it to officially exit the European Union on January 31, 2020 with a deal. The Asian indices traded higher as China and the US sign a preliminary trade deal on January 15, 2020. The Shanghai index increased by 2.20 per cent, followed by Hang Seng which increased by 2 per cent, and Nikkei increasing by 1.56 per cent. Domestic indices Sensex and Nifty have posted a flat growth of 0.95 per cent and 0.87 per cent for the last few weeks. The Small-Cap and Mid-Cap indices outperformed by 5.38 per cent and 2.89 per cent respectively on account of buying by institutional investors.

The Realty index rose by 6.70 per cent due to pre-budget expectations. Following it, other indices such as Power, Metal, FMCG and IT also surged by 3.74 per cent, 3.38 per cent, 3.27 per cent and 3.80 per cent. On the contrary, Auto and Bankex registered de-growth of 0.28 per cent and 0.89 per cent.

The trading data for the FIIs and DIIs showed that for the fortnight under review, FIIs were net buyers to the tune of Rs 1,772.72 crore and DIIs were also net buyers to the tune of Rs 637.68 crore.

Oil and rupee were the most affected due to US-Iran tensions. While Iraq is the second-largest OPEC producer, crude oil prices have been volatile for the last three years due to Iran-Iraq and US-Iraq tensions. The fortnight saw crude prices reaching a 14-month high, thus creating concern about increase in insurance, refineries and freight charges. The gold price increased by 1.64 per cent to Rs 40,780 for 10 grams of 24-carat in the last 15 days. Brent crude prices fluctuated with a decrease of 3.70 per cent since December 30, 2019 to USD 64.20 per barrel on January 13, 2020, whereas it increased by 3.35 per cent to USD 68.91 per barrel on January 6, 2020. On January 7, 2020, the rupee touched 72.20 per USD and later appreciated to 70.86 per USD as on January 14, 2020.