Market turmoil: Sensex, Nifty drop 1% amid Middle East crisis

Tracking weak cues from Asian peers, the Indian equities market opened sharply lower on Monday as heightened tensions in Middle East following three American bombing of three nuclear facilities in Iran spooked investors. The domestic benchmark indices, the BSE Sensex and the NSE Nifty, dropped over 1% in opening trade, in sync with the Asian markets where all major indices, including Japan, Hong Kong and China, were flashing in the red.

At the time of reporting, the BSE Sensex was at 81,655, lower by 753 points, or 0.91%, while the Nifty50 was at 24,870, down by 242 points or 0.96%. Earlier today, the 30-share Sensex opened 704 points lower at 81,704, while the 50-share Nifty opened at 24,940, down 173 points.

Comparatively, the broader market showed some resilience, with the BSE Midcap and SmallCap indices sliding by 0.5% and 0.2%, respectively.

Among the BSE Sensex firms, except Bharat Electronics (BEL) , all other 29 stocks were trading in negative terrain, led by Infosys , Mahindra and Mahindra , Hindustan Unilever , Power Grid , and Tata Consultancy Services , falling in the range of 1.5-2.5%.  

Shares of BEL rose by up to 1.5% after the state-owned defence company said that it has received new orders totaling ₹585 crore since its last update on June 5.

On the sectoral front, all the indices were trading lower, led by the IT index after global software services and consultancy firm Accenture announced its results on Friday. Accenture has increased the lower end of the annual revenue growth guidance to 6-7% from 5-7% earlier.

Analysts recommend ‘buy on dips’ strategy in choppy market

Despite heightened volatility, the market construct continues to favour a “buy on dips’ strategy", said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

"Even though the US bombing of Iran’s three nuclear facilities has worsened the crisis in West Asia, the impact on the market is likely to be limited. The uncertain factor now is the timing and nature of the Iranian response,” he said.

“Even though the possibility of the closure of Hormuz Strait is a threat, it is important to understand that this has always been only a threat and the Strait had never been closed. The fact is that the closure of Hormuz Strait will harm Iran and Iran’s friend China more than anyone else. The market construct continues to favour a ‘buy on dips’ strategy," he added.

From the technical prospective, the strategy should be to take short trades if the Nifty reaches the highs of 25,200 and 25,250, at a stop loss at 25,350, said Shrikant Chouhan, Head Equity Research, Kotak Securities.

On the other hand, he expects further weakness below 24,700, recommending a minimum stop loss for it at 24,800. “Below 24,700, there is scope for it to fall back to 24,500 levels. However, a denial of further falls below 24,700 would be positive for the market. Contra buying is recommended between 24,500 and 24,200.” Chouhan said.

“For Bank Nifty, a higher lower support is placed at 55,500. Above this, it can bounce back towards 57,000-57,350. Conversely, if it slips below 56,500, it can decline towards the 50-day SMA or 55,000 and 54,800 levels,” he said.

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