Mumbai: Indian equity benchmarks shattered on sharp spike up in crude oil prices in international markets on Thursday, reacting to growing concerns in Libya, which could spread over to other oil producing as well as exporting countries in Middle East like Saudi Arabia.
The Sensex shed more than 600 points in an intraday trade while the Nifty slipped below 5300-mark - near to two-week lows.
Brent crude rallied as much as $8.54 a barrel to a peak of $119.79, trimming gains to trade up $6.00 at $117.25. The contract has risen nearly 14 per cent in four days.
US crude for April delivery rose as high as $103.41, the highest September 2009. It traded up $4.31 at $102.41.
The concern for oil markets is how unrest might affect Saudi Arabia, which not only pumps around 10 per cent of the world's oil but is also the only holder of significant spare crude production capacity that could be used to plug supply outages such as those being suffered by Libya.
"The situation in the Middle East is causing a lot of uncertainty in the market now, the risk of disruption to major producers in the region is what every investor is watching now," said Ken Hasegawa, a commodity derivatives manager at Newedge brokerage in Tokyo.
India is the fourth largest oil importer, so the surge in oil prices could push up country's inflation and fiscal deficit.
Raamdeo Agrawal of Motilal Oswal said investor reaction in given situation was not surprising. "India 80 per cent dependent on global imports of oil."
Emil Wolter, Head of Regional Asian Equity Strategist at RBS said that the fiscal deficit in India has become very challenging. He sees fiscal deficit touching 7 per cent if crude continues to remain at elevated levels.
On India’s inflation woes, he doesn’t find any significant drop in inflationary pressures. “The underpinning reality is there has been only very limited supply side reforms in India while the demand is quite strong.”
The 30-share BSE Sensex dropped 545.92 points or 3 per cent, to close at 17,632.41 and the 50-share NSE Nifty fell 174.65 points or 3.21 per cent, to end at 5262.70. The BSE Midcap and Smallcap indices too tanked three percent each.
All sectoral indices butchered badly; the BSE Bank and Capital Goods indices hit the hard - plunged 4 per cent. Auto, Realty, Metal, Healthcare, Oil & Gas, Power, FMCG and IT indices were down 2-3.5 per cent.
(With inputs from Reuters)
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