Indian Shares Fall on Rising U.S. Rate Concerns and Middle East Conflict

Indian shares experienced a decline on Monday as concerns over rising U.S. interest rates, strong jobs data, and a surge in oil prices due to a military conflict in the Middle East weighed on investor sentiment. The NSE Nifty 50 index was down 0.41% at 19,572.25, while the S&P BSE Sensex fell 0.40% to 65,730.25.

With the exception of the information technology sector, all major sectoral indexes witnessed losses. High weightage banks and oil & gas stocks each lost 1%, while public sector banks, metals, and media stocks shed over 2% each. Small- and mid-cap stocks, which are more domestically focused, also experienced declines of over 1.5%.

Analysts at Kotak Institutional Equities noted that they find better value in top large-cap stocks and expect them to outperform small- and mid-caps. They believe that the current enthusiasm surrounding mid- and small-cap stocks may fade over time, leading to a realignment of valuations with their fundamentals.

Asian equities remained subdued following the strong U.S. jobs report, which raised concerns about a prolonged high interest rate regime. Additionally, oil prices rose due to the military conflict in the Middle East, with Israel attacking the Palestinian enclave of Gaza. This increase in oil prices is a negative factor for importers like India.

Amidst the Israel-Hamas conflict, investors are advised to exercise caution and refrain from taking significant risks. VK Vijayakumar, chief investment strategist at Geojit Financial Services, highlighted the potential disruption in oil supplies if Iran becomes involved in the conflict, leading to a spike in crude prices and triggering a risk-off sentiment in the market.

In individual stock news, Puravankara witnessed a 4% decline after the income tax department conducted a search at its office and other premises. On the other hand, Prestige Estates Projects gained 3% as the company reported a significant year-on-year jump in quarterly sales, reaching 70.93 billion rupees.

Overall, the Indian stock market faced headwinds due to global factors and geopolitical tensions. Investors are advised to stay vigilant and consider the potential impact of these developments on their investment strategies.