Sensex tanks 642 points as Saudi oil attack spooks St

Fear gripped the domestic equity market on Tuesday as key benchmark indices fell over 1.6% amid a spike in crude oil prices post the drone attack on Saudi Arabian oil fields a few days back.

The S&P BSE Sensex breached the 37000 level and plunged 704.22 points intra-day before closing 642.22 points, or 1.73%, lower at 36481.09. The NSE Nifty 50, too, breached the 11000 level and dropped 207 points intra-day before ending 185.90 points, or 1.69%, lower at 10817.60.

On Monday, Reserve Bank of India's governor cautioned that the Saudi Aramco oil crisis could affect India's current account deficit and fiscal deficit if it lasts longer. A poor set of macro data from China also contributed to Tuesday's fall.

Apart from Hindustan Unilever, Asian Paints, and Infosys, all the stocks in the Sensex pack ended in red, with major losers being Hero MotoCorp, Tata Motors, Axis Bank, Tata Steel, Maruti Suzuki India, and State Bank of India, which fell up to 6.19%.

All the sectoral indices on Nifty ended in the red. The benchmark index was dragged down by Nifty Auto (-3.83%), Nifty Realty (-3.73%) and Nifty PSU Bank (-3.67%).

Broader indices such as midcaps and smallcaps underperformed the key benchmark indices.

Last Saturday, the oil establishments in Saudi Arabia were hit by drone attacks, which halved the kingdom's output, thus threatening a supply shortage. On Monday, Brent crude touched a record spike, hurting investors' sentiment, even though prices remained steady on Tuesday.

Shrikant S Chouhan, senior vice president, equity technical research, Kotak Securities, said, "Indian spot rupee surged to 71.95, Brent crude prices moved to $69 and the 10-year yield was at 6.72%. All these factors are dampening the economy and will be difficult to tackle in the short term. It spooked the markets in the second half of the trading session when there was hardly any follow-up buying. Bank Nifty lost 800 points, its biggest decline since August 2019. Technically, the Nifty has broken the equilibrium level at 10930 and closed at the lower boundary of the channel. Below 10740, Nifty would enter in quick retracement towards 10637. On Wednesday, global markets may trade sideways on the back of the outcome from the Fed meeting on the rate cut."

According to Romesh Tiwari, head of research, CapitalAim, the benchmark Nifty50 index slipped due to panic sell-off. Asian markets fell as investors broadly remained on the sidelines ahead of an expected interest rate cut from the Federal Reserve on Wednesday and the next round of US-China trade talks on Thursday. Investor sentiment remained weak amid geopolitical uncertainties over the Saudi oil turmoil, US-China trade war, and the looming global economic slowdown.

"This week, if benchmark Nifty50 index moves below the range of 10800-10750 levels on a closing basis, then we could witness a more severe bearish move that may pull it down to 10500-level. On the other hand, if 10750 level remains intact then the market may trade between 10750 and 11150 level," Tiwari said.

Nagaraj Shetti, a technical research analyst, HDFC Securities, said, "The Nifty showing a sharp weakness indicates a reversal of a recent upside bounce. The key overhead resistance of 11100 has acted as a strong resistance for the fourth occasion and resulted in a sharp decline. As per its previous reversal from the highs, one may expect further weakness in the next 1-2 sessions. The next lower level to be watched is 10700."

...& ANALYSIS

• Reserve Bank of India governor has cautioned that Saudi Aramco oil crisis could affect India's current account deficit and fiscal deficit if it lasts longer
   
• If benchmark Nifty50 index moves below the range of 10800-10750 levels on a closing basis, then we could witness a more severe bearish move that may pull it down to 10500-level