- Nifty and Sensex fell sharply due to rising crude prices and IRDAI insurance reforms
- Crude oil surged back above $100 a barrel, with $110 seen as a near-term possibility
- Gold and silver are considered undervalued and recommended for physical purchase now
Indian benchmark indices Nifty and Sensex crashed on Thursday, largely due to the rising crude oil prices and the sell-off in financial stocks, which was triggered by the IRDAI's proposal on insurance sector overhaul.
Peter McGuire, chief strategist for Asia Pacific at XM.com, speaking from Greece, told NDTV Profit that crude had surged after trading below $100 a barrel just 24 to 48 hours earlier.
"There's no doubt... you've seen markets bid up as far as price. It's been an explosive move to the upside," McGuire said, adding that the market was "heading back into the wrong direction" rather than towards resolution.
McGuire said $110 a barrel was now a realistic near-term possibility.
"I'm looking at $110 as a possibility quite simply because of the way it's been bid up, the ferociousness of its climb," he said, calling it a "psychological" hurdle to watch through the New York and European sessions.
He also flagged gold and silver as undervalued: "If you're holding physical gold and silver and not the paper market, now's the time to buy it... it's going to be significantly more than where it is at the moment in three to six months."
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Triple Whammy For Emerging Markets
Manishi Raychaudhuri, chief executive of Emmer Capital Partners in Hong Kong, described the pressure on emerging markets as a "triple whammy" — record-high US yields, imported inflation from weakening currencies, and capital flows gravitating towards dollar-denominated assets.
He said current-account-deficit economies such as India, Indonesia and the Philippines were especially exposed, and that a Reserve Bank of India rate hike in early October now looked "almost certain".
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Raychaudhuri linked the sharp rise in India's volatility index — up 27% — to comments from Iranian officials suggesting the conflict with the US could extend into the Indian Ocean.
"Did we think that both the Strait of Hormuz and the Strait of Bab would be closed... at any point in time? That would have been unthinkable. And that unthinkable has unfortunately happened now," he said, adding that India, as a large energy importer, was more vulnerable than markets with current-account surpluses, such as those in North Asia.
For now, both strategists suggested caution over conviction — McGuire likened buying into the decline to "trying to catch a falling knife," while Raychaudhuri said he would wait for signs of a US-Iran breakthrough before turning more constructive on Indian equities.
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