Israel-Palestine War: Indian Stocks to Watch

What is happening in Middle-East?

The Middle East is currently in turmoil as an attack by an Iran-backed Hamas group has sparked fears of a wider crisis. This conflict has led to speculation about its potential impact on the booming Iranian trade. As a result, U.S. stock futures slipped in Asia on Monday, while oil and Treasuries surged. This situation has created a cautious mood in the financial markets, with investors seeking safe-haven assets like Japanese yen and gold.

Impact of it on Stocks Market

Bonds

The escalating conflict in the Middle East has had significant repercussions on the global stock market. U.S. stock futures dipped as investors became increasingly concerned about the potential consequences of the crisis. The risk of higher oil prices, a slump in equities, and increased market volatility has prompted investors to seek refuge in safe assets. As a result, bond prices have risen, and the value of the Japanese yen has strengthened. The euro, on the other hand, has faced losses.

Pharma Stocks

In the Indian stock market, several companies with ties to Israel or exposure to the war-hit region have been affected. Shares of Sun Pharma, with its subsidiary Taro Pharmaceuticals based in Israel, have faced downward pressure. 
Other pharmaceutical giants like Dr. Reddy’s, Lupin, and Torrent Pharma also have links to Israel through exports. Adani Ports, which operates the Haifa port in Israel, saw its stock decline, although its contribution to total cargo volume is relatively small at 3 percent.

Tech & Fuel Stocks

Tata Consultancy Services (TCS) and oil marketing companies (OMC) like Indian Oil Corporation (IOC), Hindustan Petroleum Corporation, and Bharat Petroleum Corporation Limited are closely monitoring the situation in Israel. TCS has numerous projects in Israel and over 1,000 employees in the country, while OMCs are concerned about potential disruptions in crude oil supply from the Middle East.

The Paint Stocks

The paints sector, including following companies:

• Asian Paints, 
• Berger Paints, 
• IndiGo Paints,
• Kansai Nerolac Paints, 

could be adversely affected if crude oil prices continue to rise due to the conflict. These companies rely on crude oil derivatives as key ingredients in their paint production, and soaring input prices could negatively impact their profitability.

Impact on Oil market

The Middle East crisis has had a direct impact on the oil market. The danger of supply disruptions, particularly from Iran, has driven up oil prices. Brent crude jumped by $2.88 to reach $87.46 a barrel, while U.S. crude climbed by $3.02 to $85.81 per barrel. 

This increase in oil prices has been a direct result of concerns over potential disruptions in Iranian oil exports and the already tight physical oil markets in Q4 2023. There is a possibility that Brent futures could surpass $100 per barrel in the short term if Iran's oil exports are immediately reduced.

Impact on Global market

The Middle East crisis has sent shockwaves throughout the global market. The rise in oil prices and the potential for supply disruptions have created uncertainty and volatility in financial markets worldwide. The cautious sentiment has driven investors toward safe assets like gold and Japanese yen, while leading to losses in the euro and a dip in the U.S. dollar.

Impact on Indian Stocks and Why?

Several Indian stocks have been affected by the Israel-Hamas conflict due to their ties to Israel or exposure to the Middle East region. Sun Pharma, with its Israel-based subsidiary Taro Pharmaceuticals, has seen its shares weighed down. Other pharmaceutical companies like Dr. Reddy’s, Lupin, and Torrent Pharma also have links to Israel through their exports. Adani Ports, which operates the Haifa port in Israel, witnessed a nearly 5 percent decline in its stock value. Tata Consultancy Services (TCS) and oil marketing companies (OMC) like Indian Oil Corporation (IOC), Hindustan Petroleum Corporation, and Bharat Petroleum Corporation Limited are monitoring the situation closely.

What should Retail Investor DO?

For retail investors, navigating the current market conditions requires a cautious approach. The Middle East crisis has introduced heightened uncertainty, and the potential for increased market volatility is a significant concern. It's essential for retail investors to assess their portfolios, diversify their investments, and consider the impact of the conflict on specific stocks they hold.

Diversification can help mitigate risks associated with the turmoil in the Middle East. Investors should also stay informed about developments in the region and their potential repercussions on the global and Indian markets. Keeping a close eye on oil prices and the performance of companies with ties to Israel or the Middle East can help retail investors make informed decisions.

In times of heightened uncertainty, it's advisable for retail investors to consult with financial experts or advisors to formulate a strategy that aligns with their investment goals and risk tolerance.

Conclusion

The ongoing crisis in the Middle East has had far-reaching implications for the global financial markets, particularly in stocks and oil. The potential for supply disruptions, rising oil prices, and increased market volatility have created an atmosphere of caution among investors. 

Indian companies with ties to Israel or exposure to the Middle East region have also felt the impact. Retail investors should exercise prudence, diversify their portfolios, and stay informed to navigate these uncertain times effectively. Consulting with financial experts can provide valuable guidance in making informed investment decisions during this period of heightened instability.