Mumbai :Indian shares and currency fell in early trade Friday as possible airstrikes by the U.S. in Iraq and escalating tensions between Ukraine and Russia dampened risk appetite among investors.
The S&P BSE Sensex was trading down 0.9% at 25,357.20 points, while the National Stock Exchange Nifty index also fell 0.9% to 7,578.35.
The Indian rupee weakened against the U.S. dollar to a five-month low as investors flocked to safe haven assets. In early trade, a dollar was buying 61.70 rupees compared with 61.22 rupees at Thursday’s close.
Most of the Asian shares fell Friday with Japanese stocks sliding 3%.
“The global political crisis is hitting all the emerging economies and we can expect a slowdown in foreign money flows if this situation continues for long,” said Naveen Mathur, associate director for commodities and currencies at Angel Broking.
Strong foreign investor interest on the back of growing optimism about a recovery in the south Asian economy has helped drive Indian shares and strengthen the local currency this year. Investors are hoping that the country’s new government led by Prime Minister Narendra Modi, which has a majority in parliament, will be able to push through important policy changes needed to boost growth.
However, some investors are already feeling let down by the pace of reforms since the government took charge in May. Key legislation such as to allow greater foreign ownership in the local insurance ventures are facing political roadblocks, discouraging investors.
Those concerns have reflected in recent data from the country’s capital market regulator. The data show foreign investors have sold about $1.3 billion of Indian stocks and debt so far this month after pouring in more than $20 billion in the first half of 2014.
The escalating tension in Iraq, after U.S. President Barack Obama authorized targeted U.S. military strikes in Iraq if needed to slow the advance of Islamic militants, is also hurting market sentiment. Iraq is among the top crude suppliers to India.
Any increase in international crude-oil prices could also push up import costs for India, hurting the government’s finances.
Eleven of 12-sectors indices on the BSE were trading lower.
Among the major losers on the Sensex, Tata Motors and Bharat Heavy Electricals fell 2.4% each, while ICICI Bank lost 1.6%.
