Indian benchmark indices Sensex and Nifty experienced a decline in early trade, mirroring weak global market trends and persistent outflows from foreign institutional investors (FIIs), exacerbated by ongoing geopolitical uncertainties in West Asia.
The Indian rupee depreciated significantly against the US dollar, reaching a new all-time low due to rising oil prices, a strong dollar, and ongoing geopolitical concerns. Domestic equity market declines and foreign investment outflows further contributed to the rupee's weakness.
India has raised concerns with Iran over the safety of merchant shipping after two vessels were fired upon in the Strait of Hormuz, prompting them to turn back.
India is in communication with Iranian officials to ensure the safety and secure passage of its ships through the Strait of Hormuz, following recent firing incidents involving Indian vessels.
As the rupee weakens, wealthy families are accelerating investments in global assets.
India plans to release about 5 million barrels of crude oil from its emergency stockpile in tandem with the US, Japan and other major economies to cool prices, a top government official said on Tuesday. India stores about 38 million barrels of crude oil in underground caverns at three locations on the east and west coast. Of this, about 5 million barrels will be released, starting as early as 7-10 days, the official, who wished not to be named said.
The real benefits can be seen when prices stabilise, preferably at levels acceptable to both consumers and producers.
The incident came shortly after a spokesperson from Iran's military warned that Tehran could target ports and docks in the United Arab Emirates following recent United States strikes on Kharg Island, a key hub for Iran's oil exports.
The underground industry is estimated to be worth hundreds of millions of dollars a year.
Escalating geopolitical tensions in West Asia are beginning to disrupt India's automotive supply chain, leading to rising commodity prices, logistics bottlenecks, material shortages, and pressure on consumer demand, with two-wheeler makers already raising prices.
Two India-bound LPG tankers have crossed the Strait of Hormuz amid heightened tensions in the region, while an India-flagged vessel sank after being hit near the strategic shipping corridor.
The basket of crude oil that India buys has hit a decade high of $121 per barrel, but retail selling prices of petrol and diesel continue to remain frozen. The Indian basket on June 9 touched $121.28, matching levels seen in February/March 2012, according to data available from the oil ministry's Petroleum Planning and Analysis Cell (PPAC). As per the PPAC, the Indian basket of crude oil averaged $111.86 per barrel between February 25 and March 29 - the immediate period after Russia's invasion of Ukraine sent oil on fire.
The Indian banking system's net liquidity surplus has reached a four-year high of Rs 4.57 trillion, driven by maturing government securities, with further maturities expected to push the surplus to around 5 trillion.
"The prime minister is thinking of having a meeting of all political leaders and it could take place in the second week of next month," sources in the government said. While the agriculture scenario was comfortable spiralling crude oil prices in the international market was causing a concern, they said. Crude oil reached $96 a barrel mark early this month. However, it has come a notch lower now.
India's trade account could come under pressure and there could be an inflation push if crude oil prices remain above the $90 per barrel (Brent) for a prolonged period since India imports over 85 per cent of its oil and roughly 50 per cent of its gas. A rebound in economic activity is bound to lead to higher fuel demand. While India is the third-largest importer of crude, it is a net exporter of refined products, which helps to compensate to some degree.
Prime Minister Narendra Modi has offered India's support to bring peace to West Asia during talks with UAE President Sheikh Mohamed bin Zayed Al Nahyan. Both countries signed agreements to strengthen strategic collaborations in energy and defence.
India has condemned the escalating attacks on commercial shipping in West Asia, particularly after a Thai-flagged vessel en route to India's Kandla Port was targeted in the Strait of Hormuz. The attacks have disrupted global oil and gas supplies, impacting India's energy imports.
External Affairs Minister S Jaishankar defends India's purchase of Russian oil, stating it is not the largest purchaser and that the US had previously supported such actions to stabilize energy markets. He also addresses concerns about tariffs and trade relations with the US.
India has gained the least since Russia invaded Ukraine in February 2022 and was penalised the most, while the US, China and the European Union emerged as the biggest beneficiaries from the war.
US President Donald Trump claims India has significantly reduced and nearly stopped purchasing oil from Russia, citing de-escalation efforts. This follows previous tensions over tariffs and India's energy sourcing.
Saudis are interested in expanding their relationship with India, given it is becoming the main driver of crude demand growth in Asia
India's crude oil imports soared over 8 per cent in July to match rise in fuel consumption that continued to be propelled by double-digit growth in diesel demand.
State-run Indian Oil Corporation will import 31.41 million tonnes of crude oil this fiscal, 53 per cent of which would be on term contracts.\n\n\n\n
'The West Asia or the Gulf crisis has shown that what we develop as national infrastructure when things are not as bad as they could be, we forget to plan for adversities.'
This means lower losses on fuel sales by Indian oil companies and a shrinking oil subsidy bill for the government.
Top losers in the Sensex pack included M&M, SBI, Yes Bank, Asian Paints, HDFC, Tata Steel and L&T, shedding up to 2.55 per cent. The broader NSE Nifty settled 79.80 points, or 0.72 per cent, down at 10,996.10.
A prolonged supply shock can transmit to lower incomes, and dampen confidence and sentiment, warns Aditi Nayar, chief economist, head-research and outreach, ICRA.
Bessent indicated that the U.S. is evaluating the status of Iranian oil as the current campaign progresses.
Finance Minister P Chidambaram on Monday said the surge in international oil prices is a matter of grave concern and it was for the petroleum ministry to take a call on retail pricing of petroleum products.
Shares of Reliance Industries Limited (RIL) tumbled on Tuesday, posting its biggest single-day decline in 19 months, amid controversy over its purchase of Russian oil and profit-booking after recent gains.
Indian benchmark indices Sensex and Nifty closed lower for the second consecutive day, driven by investor caution over conflicting geopolitical signals from West Asia and fresh foreign institutional investor (FII) outflows.
'Once the currency goes out of the hand, then possibly your major challenge is that it will not come back.'
Modi said that the West Asia crisis has been going on now for more than three weeks and is having a very adverse impact on the global economy and on people's lives. He said the entire world is urging all parties for the earliest resolution of this crisis.
The banking sector in the country is stable, capital is available and credit offtake is poised to take off, he said at a webinar organised by Bharat Chamber of Commerce. "We are not unique to the phenomenon of uncertain growth and high inflation due to the pandemic.
Trump said that the strait will be "open very soon" if ongoing negotiations with Tehran continue successfully.
The government on Wednesday scrapped a week-old tax on the export of petrol and cut windfall taxes on overseas shipment of diesel and ATF as well as the one imposed on domestically produced crude oil after global oil prices fell. While the Rs 6 a litre export duty on petrol was scrapped, the tax on the export of diesel and jet fuel (ATF) was cut by Rs 2 per litre each to Rs 11 and Rs 4 respectively, government notifications showed. The tax on domestically produced crude was also cut to Rs 17,000 per tonne from Rs 23,250, a move that will benefit producers like ONGC and Vedanta Ltd.
India's fiscal deficit is projected to reach 4.5 per cent of GDP for the current fiscal year, exceeding the budgeted target, as the government's policy responses to the West Asia conflict are expected to strain public finances, according to research firm BMI.
The government on Friday slapped an export tax on petrol, diesel and jet fuel (ATF) while also joining nations like the UK in imposing a windfall tax on crude oil produced locally. A Rs 6 per litre tax on export of petrol and ATF and Rs 13 per litre tax on export of diesel is effective from July 1, finance ministry notifications showed. Additionally, a Rs 23,250 per tonne tax was levied on crude oil produced domestically.
The latest decision of the Organisation of Petroleum Exporting Countries and its allies, commonly known as Opec+, to boost output is being seen as an attempt to regain market share lost to the US, Brazil, and other oil producers, who have been increasing production recently.
According to the Pentagon, the vessels were targeted as part of efforts to prevent the deployment of naval mines in the strategically vital passage through which a significant portion of global crude oil shipments transits.
