Investors worldwide rushed to safe havens as France launched air attacks in Syria against the Islamic State and commodity prices rose, bucking industry trends that had seen crude oil and gold prices dip in recent months.
Indian stock markets initially tracked the global trends, opening low and falling by about 200 points, but clawed back during the day, with the benchmark BSE Sensex ending 150 points up. The broader NSE Nifty also closed up 0.6% at 7,806.60. Data released during the day that wholesale price-based inflation has reduced, helped boost sentiment.
Brent crude oil prices rose 1% in the wake of Monday’s action in Syria by French forces, but analysts are not overly concerned as stocks are high.
“The market is oversupplied, so this is only a technical recovery,” Frank Klumpp, an analyst at Stuttgart-based Landesbank Baden-Wuerttemberg told HT on phone. “We were in an oversold situation in the last couple of weeks, so the French strikes were only a trigger, but we don’t see it having much impact.” Klumpp expected oil
to end the year at $50 per barrel.
On the gold front, the terror attack sent prices up as nervous investors rushed to safe assets. In the global markets, spot gold rose over 1% to $1,097 an ounce.
“The statement by Prime Minister Narendra Modi that foreign direct investment into India has increased 40% since last year, boosted sentiments. It further improved with the contraction in wholesale price inflation figure,” said Jayant Manglik, president, Religare Securities.
However, analysts don’t expect the rally to last. Oil is bordering a glut, and gold has been trading at close to five-year lows amid expectation that the US Federal Reserve will raise interest rates next month for the first time in almost a decade.
“For a short period, there could be some kind of rebound in gold because of the events in Paris that might make investors cautious,” Mark To, head of research at Hong Kong’s Wing Fung Financial Group, told Reuters. Profit-booking will keep the rallies short-lived, he said.