The rupee on Friday plunged 42 paise to settle at a one-and-a-half-month low of 71.80 against the US dollar while the BSE Sensex ended 162 points down as crude oil prices shot up after the US ordered the killing of a top Iranian general.
Intra-day, Brent crude surged 4.5 per cent to $69.23 per barrel and WTI increased 4.1 per cent to $63.71 per barrel, after worries over an escalation in tension hit the sentiment.
Stock, currency markets to be impacted
“The rupee extended losses yet again on the back of US-Iran tensions. The spike in crude prices is making importers buy the US dollar to hedge net outflows for crude buying. If crude prices go up further, the rupee will take a hit. If the US-Iran tension escalates, it will be bad news for global markets and currencies,” dealers said.
After dropping over 286 points intra-day, the 30-share BSE Sensex ended 162.03 points, or 0.39 per cent, lower at 41,464.61. Similarly, the broader NSE Nifty closed 55.55 points, or 0.45 per cent, down at 12,226.65.
General Qassem Soleimani, head of Iran’s elite Quds force and architect of its regional security apparatus, was killed following a US airstrike at Baghdad’s international airport in Iraq Friday. The strike also killed the deputy chief of Iraq’s powerful Hashed al-Shaabi paramilitary force. The Pentagon confirmed the death of Soleimani, 62, in Iraq, saying the strike was carried out at the direction of President Donald Trump.
Besides US-Iran tensions, weak domestic equity market also weighed on the rupee. Safe-haven assets like gold and the Japanese yen strengthened as investors assessed the risk dynamics. Traders said that the near-term outlook of the rupee depends upon the outcome of the trade talks between the United States and China.
“As US continues to interfere in the Hong Kong issue, there are concerns whether the deal will happen or not. If the trade talks fail, then the US will go ahead with tariffs on Chinese goods from 15th December,” said Rushabh Maru, research analyst—currency and commodity, Anand Rathi Shares and Stock Brokers.
Vinod Nair, head of research, Geojit Financial Services, said, “Investors turned cautious as tensions emerged in the Middle East. Crude oil prices rose while strong dollar held IT & pharma stocks higher. With the market testing new highs, emergence of geopolitical tensions could force people to book some profits. Crude prices could turn volatile due to risk of possible retaliation from Iran which could impact the performance in the short-term.”
Sectorally, power, auto, bankex, finance, metal, utilities and basic materials indices skidded up to 1.20 per cent, while IT, teck and healthcare rose up to 1.52 per cent. The broader BSE Midcap index settled 0.45 per cent lower, while the smallcap gauge closed in the green. Asian Paints was the top loser in the Sensex pack, dropping 2.16 per cent, followed by Axis Bank, Bajaj Auto, SBI, NTPC and Bajaj Finance. On the other hand, Sun Pharma, TCS, HCL Tech, Infosys, Tech Mahindra and Bharti Airtel rose up to 2.08 per cent
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