INDIA STOCKS-Indian shares fall after Trump dashes hopes of Iran war de-escalation
By Bharath Rajeswaran
April 2 (Reuters) - Indian shares fell on Thursday, tracking weakness in Asian peers, after President Donald Trump said the U.S. would hit Iran "extremely hard" in the coming weeks, dimming hopes of a near-term end to the war that has unsettled global markets.
The Nifty 50 .NSEI was down 1.95% at 22,236.80 and the BSE Sensex .BSESN shed 1.95% to 71,710.72 as of 9:50 a.m. IST.
Other Asian markets .MIAPJ0000PUS dropped 2% after Trump said Washington's "core strategic objectives" in the Iran war were nearing completion. However, he did not provide a clear outlook on when the conflict would end. MKTS/GLOB
Trump's comments that the United States would continue to attack Iran intensified geopolitical jitters and drove crude oil prices higher. O/R
"A prolonged disruption in oil/energy flows via the Strait of Hormuz can still keep oil prices elevated longer than we had initially hoped for and the Indian economy is one of the most vulnerable to high energy prices," said analysts led by Chetan Seth of Nomura.
The brokerage downgraded Indian equities to "neutral" from "overweight", citing elevated risks to earnings and valuations from higher crude prices.
Small-caps .NIFSMCP100 and mid-caps .NIFMDCP100 fell about 3% each and all 16 major sectors declined. Financials .NIFTYFIN and banks .NSEBANK lost 2.5% each, while the PSU bank index .NIFTYPSU dropped 3.1%.
The fall follows tighter forex derivatives rules by the Reserve Bank of India, requiring banks to close contracts in open markets and removing leeway to sell to corporate clients.
The rules are negative for banks as they may lead to higher losses, said Jefferies analysts Prakhar Sharma and Vinayak Agarwal.
The Indian rupee INR=IN rose sharply in early trading.
Pharma stocks .NIPHARM lost 3.75% after reports of Trump administration's plans to announce tariffs on drugmakers as soon as Thursday.
The U.S. has been considering a 100% tariff on imported branded and patented medicines.
