Indian stocks may be unfazed by Iran reprisal attacks unless Israel responds

Iran's reprisal attacks on Israel are unlikely to significantly dent the Indian stock market unless Tel Aviv responds, in which case crude oil prices could spike on supply disruptions, market analysts said on Sunday.

Their comments came after the Tel Aviv Stock Exchange's (TASE) benchmark TA-35 index closed up 0.27% at 1938.18 on Sunday despite Iran's overnight drone and missile attacks.

The TASE runs from Sunday through Thursday. On Sundays, it opens at 9:59 am and closes at 3:39 pm, and operates between 9:59 am and 5:14 pm Israel Daylight Time on other days. The Gift Nifty, traded in Gift City, Gujarat, closed last week at 22452.50, indicating a 67-point cut for Nifty at Monday opening from Friday's close of 22519.4. However, the Gift Nifty value will be updated early Monday morning.

"The markets across debt, equity, and gold will be concerned about the escalation in conflict in West East, as it is currently pricing in business as usual with minimal impact," said Nilesh Shah , MD, Kotak AMC.

Shah caveated that market concerns would hinge on prices and uninterrupted supplies of crude . Brent oil active futures closed at $90.15 a barrel on Friday.

"Higher energy prices adversely affect inflation, current account deficit, GDP growth, corporate earnings and rupee. Markets will adjust as the situation develops," he added.

"If there isn't any escalation, markets will take the latest geopolitical event in their stride," said B Gopkumar, MD & CEO, Axis Mutual Fund. "There could be some short-term volatility, (but) no deep cut."

With Israel-Iran hostilities rising on Thursday, when Indian markets were closed for Eid, after a missile strike on the Iranian consulate in Syria killed senior military commanders, Indian stock indices declined by a little over a percent as FPIs sold shares worth a provisional ₹8,027 crore and trimmed their bullish derivatives bets the next day. Buying by DIIs worth ₹6,341.53 crore limited the losses.

Indeed, retail and HNIs turned aggressively bullish on Friday while proprietary traders took a bearish stance and FPIs trimmed their bullish bets.

From being cumulatively net short 16,088 index futures (Nifty and Bank Nifty) contracts on Wednesday, retail and HNI, designated client by NSE, initiated bullish bets of a net 3814 contracts on Friday.

They also were cumulatively long 31,133 Nifty and Bank Nifty (index) call options and short 432,609 index puts. A person selling or shorting puts is bullish.

Stacked against them were proprietary traders, who held 20,641 short index futures contracts, 72,720 short index call option (Nifty and Bank Nifty) contracts and long 2.23 lakh index put contracts .

A call seller and put buyer indicate bearish markets.

FPIs trimmed their cumulative bullish index futures bets by 17,834 contracts to 33448 on Friday, while cumulative long index call contracts were at 41587 contracts , down from 1.4 lakh contracts on Wednesday.

Kruti Shah, quantitative analyst at Equirus, said the uptrend would sustain as long as markets don't break below the crucial support of 21800-22000. The Nifty closed last week at 22519.40. Shah expects the market to be supported by TCS, which put up a "decent show" in Q4.

Weekly options show the support at 22200 and the resistance at 22700. The Nifty trades close to its all time high of 22775.7 on 10 April.

So far this year, FPIs have net purchased shares worth ₹24,240 crore while DIIs purchased shares worth ₹1.2 trillion.