Updates for markets close
Nifty settles at one-month low, Sensex slips to six-month low
Shares fall as Middle East conflict raises crude prices
Oil explorers gain as crude prices boost profitability
Indian rupee depreciates, bond yields rise
War risks India's economic growth, inflation balance - analysts
By Bharath Rajeswaran
March 2 (Reuters) - Indian share benchmarks tumbled on Monday as the escalating Middle East conflict pushed crude prices higher and triggered investor flight to safe havens such as gold and the U.S. dollar.
The Middle East supplies about half of India's crude imports, and is the source of 40% of remittances and the destination for 17% of India's exports, according to Jefferies and BofA Securities.
A spike in oil prices and trade disruption drive up the cost of imported goods, weakens the rupee and stokes inflation, squeezing businesses and households alike.
The Nifty 50 .NSEI dropped 1.24% to a one-month low of 24,865.70 while the BSE Sensex .BSESN shed 1.29% to 80,238.85, lowest in six months.
The rupee INR=IN depreciated against the dollar, and government bond yields rose after the U.S. and Israel struck Iran over the weekend, killing its supreme leader, which spurred retaliation from Tehran.
Iran closed navigation via the Strait of Hormuz, likely disrupting nearly 20% of global oil flows and more than 40% of India's crude imports. Brent crude prices surged 8.1% to $78.8 per barrel. O/R
The Indian economy has seen strong growth and low inflation over the past year, but a jump in oil prices and disruption in shipping routes could risk tipping the balance, analysts said.
"As a large crude importer, India faces clear near-term headwinds, and a prolonged conflict could push Nifty below 24,500 levels," said Venugopal Garre and Nikhil Arela, analysts at Bernstein.
"The larger macro concern (due to rise in oil prices) is a renewed burst of inflation that delays rate cuts and crimps consumption as prices rise."
The government can initially shield households by absorbing part of the shock via "oil market companies' balance sheets" and its own fiscal measures, but that "constrains budget headroom and risks crowding out domestic capex," they said.
BROAD-BASED LOSSES
Fourteen of the 16 major sectors logged losses. The broader small-caps .NIFSMCP100 and mid-caps .NIFMDCP100 fell 1.8% and 1.6%, respectively.
Shares of oil marketing companies, paint and tyre makers, aviation companies and chemical manufacturers slipped as crude oil prices rose.
Index heavyweight and oil-to-telecom conglomerate Reliance Industries RELI.NS dropped 2.6%, dragging the benchmark indexes.
Larsen and Toubro LART.NS fell 5%. The company said that the Middle East is a strategically significant market, citing its long-standing presence across energy, infrastructure, renewables and technology sectors.
Oil explorers, which benefit from higher crude prices, such as ONGC ONGC.NS and Oil India OILI.NS rose about 0.9% each.
India's equity, currency and debt markets will be closed for a holiday on Tuesday.
Middle East conflict: Sector-wise impact on Indian companies https://reut.rs/4aWQyaa
Indian stocks, rupee fall as Iran war roils sentiment https://reut.rs/46UHnWL
(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sherry Jacob-Phillips, Mrigank Dhaniwala and Harikrishann Nair)
((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))