Iran-Israel War: How It Impacts Nifty, Sensex And Indian Rupee

Financial markets around the world is taking a whacking from the escalating war between Iran and Israel and Indian market is also feeling the heat while the rupee has again touched a record low against the US dollar.

Indian stock benchmarks opened deep in the red, tracking a wider sell-off in global markets after reports of a sharp escalation in Middle East hostilities.

"With the current escalation of the Israel-Iran war, global stock markets including in India have been jittery as Crude oil continues to sustain at higher levels," said AR Ramachandran from Tips2trades.

"This development definitely weakens the buoyant sentiment prevailing in the markets expecting rate cuts and a Daily close above resistance of 83.72 could lead the USDINR to 84.61 in the near term. BSE Sensex also looks bearish with strong resistance at 72489 on the Daily charts. A daily close below support of 71674 could lead to target of 70500 in the near term."

Investor sentiment has soured further after reports show Israel's attacks on Iran, despite de-escalation calls. The latest report showed Israeli missiles have hit a site in Iran, according to ABC News, citing a US official, days after Iran launched a drone strike on Israel in response to an attack at the Iranian embassy in Syria.

Iranian official told Reuters that there was no missile attack on Iran and the explosion heard in Isfahan was a result of activation of Iran's air defence system.

The broader concern is that the tit-for-tat attacks will escalate beyond Israel and Iran into a broader regional conflict in the Middle East.

What's not helping is the US Federal Reserve's rhetoric of "higher for longer" interest rates.

The Sensex Index opened nearly 500 points lower to trade at 72,056.02, and the broader Nifty 50 index started over 350 points in the red.

However, beyond the newsflow, Indian stocks seem to be in a sweet spot, with "sell the news" being the only roadblock for an economy humming along at the best growth rate among major economies in the world.

Still, the rupee slumped to a record weak level as flight to safety bids pushed investors sheltered in the dollar.

The rupee opened at a record low of 83.5550 on Friday, surpassing the previous low of 83.5475 as demand for safe-haven assets jumped.

"Asian markets were bruised again after fraying global sentiment and reluctance to take much risk kept ahead of weekend and persistent Middle East tensions limited any upside," said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

"USDINR closed at 83.54 ......after a rise in middle East tensions brought oil prices higher. Risk off sentiments will keep rupee on the weaker side."