Indian shares decline as Middle East conflict spooks investors

By Bharath Rajeswaran

BENGALURU (Reuters) -Indian shares fell on Monday, dragged by a surge in oil prices due to a military conflict in the Middle East and higher U.S. interest rate concerns.

The NSE Nifty 50 index closed 0.72% lower at 19,512.35, while the S&P BSE Sensex fell 0.73% to 65,512.39.

All the 13 major sectoral indexes logged losses. High weightage banks and oil & gas lost over 1% each while public sector banks shed 3.09%.

“There is a prevailing concern within global financial markets regarding potential protracted conflict between Israel and Hamas,” Jayden Ong, senior market analyst for Asia Pacific at Vantage said, adding that rising crude prices could contribute to elevated inflation.

The more domestically focussed small- and mid-caps underperformed the blue-chips, losing between 1.3% and 1.8%.

“We find better value in top large-cap stocks and expect them to outperform small- and mid-caps,” analysts at Kotak Institutional Equities wrote in a note. “The current euphoria in mid- and small-cap stocks may fade over time and the valuations will realign with their fundamentals.”

Oil prices rose following a military conflict in the Middle East between Israel and Palestinian Islamist group Hamas. Rise in oil prices is a negative for importers of the commodity, like India.

Among individual stocks, Adani Ports And Economic Zone fell 4.90% on worries of a possible escalation of the conflict in Israel, where the company owns a major port.

Oil refiners like Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp lost over 2% each, on the rise in oil prices.

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Dhanya Ann Thoppil)