US-Iran war: Sensex, Nifty cut gains; stock market chaos a social media post away

Sensex, Nifty: Following an initial strong market reaction over yet another TACO (Trump Always Chickens Out) moment, key indices cut intraday gains, as Brent crude oil recovered 4 per cent following Iran's denial of any talks with the US over a peace plan. Iran instead insisted the US President Donald Trump’s claim was a 'fake news' aimed at manipulating the markets, adding that its position on the Strait of Hormuz has not changed. Heightened volatility is here to stay, warned stock analysts. 

Sensex opened 1,516.08 points higher at 72,696.39. But the 30-pack index cut gains and was later trading at 73,408.96, up 707.78 points or 0.98 per cent higher. Nifty stood at 22,733.40, up 220.75 points or 0.98 per cent, off day's high of 22,899.60. 

"The world we are living in is the one where one tweet can make a difference between 500 points and 1,000 points on Nifty. We are one post away from chaos, one post away from peace," Abhishek Basumallick, Co-founder and Fund Manager at Shree Rama Managers told Business Today. 

Basumallick comments came as Trump had on Friday in a social media post signalled 'winding down' of US operations but threatened to 'obliterate' Iran’s power plants on Sunday if it fails to open the Strait of Hormuz (SoH) within 48 hours.

Later on Monday, Trump said the US and Iran, have had, over the last two days, productive conversations regarding a "complete and total resolution of our hostilities in the Middle East," surprising many.

Based on the tenor and tone of the in-depth, detailed, and constructive conversations, which is expected to continue throughout the week, the US President said he instructed the Department of War to postpone any and all military strikes against Iranian power plants and energy infrastructure for a five-day period, subject to the success of the ongoing meetings and discussions. 

Basumallick said after a year-and-a-half of bear market, profits of many investor made post Covid-19 have largely disappeared. Investors, he said are scrambling to protect whatever profit has remained. "Unless there is prolong peace, it is difficult to call a market bottom."

The market, it appears, is factoring in an end to the war as reflected in the August US oil futures trading at $80. However, in the near-term there will be excessive volatility in response to news regarding the war and events on the war front, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments. 

This analyst noted that Iran’s foreign ministry denied Trump's claim of negotiations. "Later they acknowledged that there are attempts to ‘get diplomacy going’ through the mediation of some countries," Vijayakumar said.