Nifty 50 drops 1.3% as oil surge hits rupee, Indian shares

Indian shares fell on Monday and the rupee weakened after Brent crude climbed above $111 a barrel, pressuring one of Asia’s most oil-sensitive major markets. The Nifty 50 dropped 1.26 per cent to 23,347.2 in early trade, while the BSE Sensex lost 1.20 per cent to 74,335.62, according to CNBC’s Asia market live coverage.

For India, which imports most of its crude, a sustained rise in Brent quickly feeds concern about the trade balance, domestic inflation and the rupee. That left local stocks exposed as risk appetite across Asia softened on renewed fears that Middle East tensions could disrupt supply routes around the Strait of Hormuz.

The selloff followed Donald Trump’s warning to Iran, which revived fears of a wider regional confrontation and possible pressure on tanker traffic through the Gulf. CNBC said the risk-off move spread through Asia’s trading day as investors cut exposure to markets most vulnerable to imported energy costs.

The Hindu’s market report cited V.K. Vijayakumar, chief investment strategist at Geojit Investments Limited, saying traders were focused on the lack of visible steps to reopen the Strait and what that could mean for crude prices.

“Brent crude has spiked to USD 111 on absence of initiatives to open the Strait of Hormuz”

— V.K. Vijayakumar, Geojit Investments Limited, via The Hindu

Vijayakumar said elevated crude prices and currency pressure remained the main concern for Indian markets. Higher oil prices raise costs for fuel buyers, but they also threaten to weaken the rupee, lifting the local-currency burden of imported energy and making Indian assets harder to price for overseas funds already wary of external shocks.

Why oil matters for India

India usually feels an oil shock through several channels at once. The import bill rises, companies with fuel exposure face margin pressure and the currency can weaken as more dollars are needed to pay for crude. For equity investors, that widens quickly into an earnings and inflation question, especially if Brent stays elevated.

The rupee matters for policy as well. If higher oil prices persist, imported inflation can reappear even without a fresh burst of domestic demand, leaving less room for any market-friendly shift in rates.

Hariprasad K, research analyst and founder at Livelong Wealth, said global risk appetite had weakened sharply after fresh escalation fears emerged in the Middle East. Indian equities were absorbing an external shock rather than reacting to a home-grown one, he said.

If Brent stays near current levels, investors are likely to watch whether the rupee weakens further and whether policymakers sound more concerned about imported inflation. Monday’s trade suggested oil had already moved beyond the commodities complex and into Indian share prices and the currency.