Markets slip as crude oil worries spook investors

PLUNGE Sensex sinks 642 points amid growing geopolitical tensions in Middle East

Fears of a spike in crude prices in the wake of Saturday’s drone attack on Saudi Arabia’s Abqaiq oil facility triggered a sharp fall in India’s stock markets on Tuesday even though Brent Crude prices that jumped 15% to close at $69.02/ barrel on Monday, the biggest intra-day jump since 2008, came down on Tuesday to trade at $64.06/barrel at 8.30 pm IST. India is the world’s third largest importer of oil.

Oil minister Dharmendra Pradhan said the development has created some “anxiety”. The events since Saturday are a matter of concerns to India but supplies from Saudi Arabia have not been disrupted, he told reporters after an industry meeting on Tuesday. “We have uplifted more than half of the contracted quantity for September. We uplifted oil yesterday [Monday] and even today [Tuesday],” he added.

Government officials said India was also exploring alternative sources and Russia could be a reliable partner for long-term supply of crude oil.

Still, fears that oil supplies from Saudi Arabia could be hit caused a meltdown in the markets with the BSE Sensex, India’s benchmark index, falling 1.73% over its previous close to end the day at 36,481.09 points. This is the third biggest intra-day fall in percentage terms this year. The BSE Sensex had fallen by 2.06% on September 3 when markets opened after the release of June quarter GDP figures and July 8 when imposition of capital gains taxes announced in the Budget on July 5 led to a large fall. Tuesday’s fall was spread across sectors, with each of BSE’s 19 subindices closing lower than previous day’s close. Auto and Realty indices suffered the most, closing 3.8% and 3.7% lower than the previous day’s close.

According to Shrikant S Chouhan, senior vice-president, Equity Technical Research, Kotak Securities, the fall in the Indian currency, crude prices and yield on 10-year bonds were dampening sentiment and “spooked markets in the second half of the trading session when there was hardly any follow-up buying.”