Indian shares suffered their worst fall in a month on Monday, as a surge in crude oil prices to nearly $120 per barrel fueled concerns over growth and inflation in Asia's third-largest economy, one of the world's largest oil importers.
Oil prices surged as much as 28.9% to their highest since mid-2022 as the Iran war dragged on and Tehran named Mojtaba Khamenei as successor to his father, Ali Khamenei, as the supreme leader.
Higher crude prices pose a significant challenge for India, the world's third-largest oil importer, as they worsen raise price pressures in the economy and amplify pressure on the rupee, which slumped to a record low against the U.S. dollar.
India's blue-chip Nifty 50 index slid 1.73% to a 10-month closing low of 24,028.05 with volatility surging to a 21-month high.
The BSE Sensex shed 1.71% to a 11-month low of 77,566.16, very close to confirming a correction from its record closing high in December last year. The indexes have fallen about 4.6% each since the start of the Iran war.
Other Asian stocks declined 3.4% and Wall Street futures slid as inflationary shock from surging crude prices threatened to push up interest rates worldwide. Safe-haven demand kept the U.S. dollar firm. [MKTS/GLOB]
"This war is different from the Ukraine war as it impacts all major economies in one stretch and quite badly so," said G Chokkalingam, founder and head of research at Equinomics Research.
"Time is running out for finding a compromise and it's a very difficult situation for markets as there is panic selling on concerns that higher crude prices will pile the pressure on currency, trade deficit and budget deficits while delaying global rate cuts and drag global growth."
Foreign investors pulled out $2.4 billion from Indian shares last week, according to provisional exchange data.
Broad-based losses
Fifteen of the 16 major sectors fell, while the broader small-caps and mid-caps lost about 2.2% and 2%, respectively.
State-run oil refiners Indian Oil, Bharat Petroleum and Hindustan Petroleum dropped between 4.4% and 6.2% as surging crude squeezes marketing margins.
State-owned lenders slid 4% on fears that the oil shock would lead to higher interest rates, which would hurt treasury income. Top private lenders HDFC Bank and ICICI Bank dropped 1.9% and 2.7%, respectively.
IndiGo-operator Interglobe Aviation sank 3.8% on worries that higher fuel costs and a hit to international air traffic would dent its earnings.
Infrastructure major Larsen & Toubro, which has a significant exposure to the Middle East, lost 2.7%, after a 7.7% fall last week.
