Sensex, Nifty: Why market is down today; strategy, stocks in focus as US-Iran talks fail

Benchmark indices Sensex and Nifty took a beating on Monday, as US-Iran peace talks collapsed and oil prices surged, following the US President Donald Trump's order to block Strait of Hormuz, reviving tensions in the West Asia. Global markets tumbled while US index futures were also trading lower, hinting at weak start for Wall Street later in the day. 

The BSE Sensex stood at 75,937.16 at open, down 1,613.09 points or 2.08 per cent. Nifty opened at 23,589.60, down 461 points or 1.92 per cent. A total of 30 of 30 Sensex stocks fell. InterGlobe Aviation Ltd led the Sensex fall, declining 6.37 per cent to 4,265.60. Maruti Suzuki India tanked 4.28 per cent to 1 3,124. Larsen & Toubro, Asian Paints and Bajaj Finance fell over 3 per cent each.

"How this naval blockade, which in effect will be a US blockade of Iran’s blockade, will play out remains to be seen. There can be dramatic developments on the geopolitical front and consequently on markets also. The ideal strategy in this ultra-uncertain situation is to wait and watch," said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

Vijayakumar said rupee might come under renewed pressure in the new unfavourable scenario, adding that the mild FPI buying witnessed last Friday is again likely to reverse further impacting sentiments.

Brent oil futures for June delivery were trading at $101.83 a barrel level today, up $6.63 or 6.96 per cent. Asian markets such as Japan's Nikkei 225, Korea's Kospi and Hong Hong's Hang Seng fell 1-1.2 per cent. US index futures declined up to 0.8 per cent, suggesting a weak start for Wall Street later in the day. 

SBI Securities in a note said Washington and Tehran talks have failed to result into an agreement, adding that the US plans to implement a blockade of all maritime traffic entering and leaving Iranian ports pushed Brent crude prices higher. It, the brokerage said, will be negative for oil marketing companies such as BPCL, IOCL and HPCL. It would also hurt airlines, chemicals, paints, tyre and plastic stocks. The development will be positive for upstream oil companies such as ONGC and Oil India, the broking firm said.

OMC stocks BPCL, HPCL and IOC fell 3-4 per cent.

"Despite Friday’s strong recovery, sentiment has turned cautious again, and the market may witness profit booking and volatility, especially if Nifty sustains below the 24,000 mark," said  Aakash Shah, Technical Research Analyst at Choice Equity Broking.  

In a social media post, Trump said: " I have also instructed our Navy to seek and interdict every vessel in International Waters that has paid a toll to Iran. No one who pays an illegal toll will have safe passage on the high seas. We will also begin destroying the mines the Iranians laid in the Straits. Any Iranian who fires at us, or at peaceful vessels, will be BLOWN TO HELL! Iran knows, better than anyone, how to END this situation which has already devastated their Country."

He said The blockade will begin shortly and that other Countries will be involved with this blockade. 

"The earlier relief from the temporary US–Iran ceasefire has reversed, as reports indicate that the US has moved to restrict access through the Strait of Hormuz following failed negotiations. This development is critical, as the route carries a significant portion of global oil supply. Crude oil prices, which had corrected from above $110 to the $94–100 range, have now surged back above $105, reintroducing inflationary and macro concerns," said Ponmudi R, CEO of Enrich Money. 

For India, the implications were immediate and significant. With over 85 per cent of crude oil imports dependent on this route, rising oil prices could pressure the current account deficit, weaken the rupee, and elevate inflation expectations. The earlier rally in Indian equities, where the Nifty and Sensex gained nearly 6 per cent last week, was largely driven by easing crude prices and improved global sentiment. That tailwind is now at risk.

Market strategy: Stocks, gold, fixed income products  
Motilal Oswal Private Wealth in a Investment Strategy note said investors can look at lump-sum investments in Hybrid funds at current levels.  For pure equity-oriented strategies, a staggered SIP/STP approach over the next 2-3 months is prudent, given the uncertainty. 

"Any sharp correction should be used for aggressive deployment. Elevated yield volatility driven by geopolitical risks, rising crude-led inflation pressures, and persistent INR weakness—constraining monetary easing and keeping long-end yields biased upward—supports a preference for accrual-oriented fixed income strategies across the credit spectrum," it said.

It maintained a neutral view on gold from asset allocation perspective.