Defense Sector Rallies Amid Middle East Conflict; Nifty Ends Lower
Indian equity markets ended the week in the red as initial optimism, spurred by progress in US–China trade talks, was quickly overshadowed by escalating geopolitical tensions following Israel's strike on Iran’s nuclear facilities.
Mumbai: Indian equity markets ended the week in the red as initial optimism, spurred by progress in US–China trade talks, was quickly overshadowed by escalating geopolitical tensions following Israel’s strike on Iran’s nuclear facilities. The rising conflict triggered global uncertainty, causing a flight to safe-haven assets and pressuring domestic equities.
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Global Risk-Off Sentiment Sends Oil and Gold Prices Soaring
The Israeli strike on Iran sparked fears of wider conflict in the Middle East, sending global markets into a risk-off mode. Investors flocked to gold and U.S. bonds, while crude oil prices surged past $76 per barrel, driven by concerns over potential supply disruptions.
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“While CPI inflation easing to a 75-month low was a relief, the recent oil spike could reignite inflationary pressure if tensions escalate further,” said Vinod Nair, Head of Research at Geojit Financial Services.
Indian Markets Slip; All Sectoral Indices End in Negative Territory
Despite a partial recovery during the day, the Nifty 50 fell 169.60 points (0.68%) to close at 24,718.60, after hitting an intraday low of 24,473. The market experienced a broad-based sell-off, with India VIX spiking over 7%, signaling increased volatility and investor anxiety.
Sectoral Performance:
- Nifty PSU Bank: -1.18%
- Nifty Bank: -1.17%
- Nifty Metal: -0.96%
- Nifty Midcap 100: -0.4%
- Nifty Smallcap 100: -0.5%
Defence Stocks Surge on Geopolitical Risk
In stark contrast to the market trend, defence stocks witnessed strong buying interest, driven by anticipation of higher order inflows amid heightened geopolitical tensions. The ongoing Israel-Iran conflict has increased focus on the defence sector, with investors expecting a ramp-up in global and domestic military spending.
According to Bajaj Broking Research, “Defence names saw sharp gains as the conflict raised expectations for increased procurement, policy focus, and strategic investments in security infrastructure.”
Expert Outlook: Caution Advised Amid Premium Valuations
Given the prevailing macroeconomic and geopolitical landscape, analysts are urging investors to adopt a balanced and cautious approach.
Ajit Mishra, SVP – Research at Religare Broking Ltd, advises, “Focus on selective stock opportunities based on sectoral themes and avoid overleveraging. Defensive positioning and proper risk management are key in the current environment.”
Eyes on Upcoming US Fed Meeting for Market Cues
Looking ahead, all attention is now on the upcoming US Federal Reserve meeting. While the Fed is widely expected to keep interest rates unchanged, its commentary and forward guidance will be critical in shaping investor sentiment in the weeks ahead.
