Eqwires | Stock Market Advisory

Asia-Pacific markets saw mixed trading on Wednesday (June 18) as heightened geopolitical tensions between Iran and Israel, along with a looming U.S. interest rate decision, kept investors on edge.

Geopolitical Risks Weigh on Sentiment

Concerns deepened after former U.S. President Donald Trump reportedly considered a military strike on Iran, according to NBC News. Trump also posted on Truth Social, demanding “UNCONDITIONAL SURRENDER!” from Iranian Supreme Leader Ayatollah Ali Khamenei—a move that spurred fears of greater U.S. involvement in the escalating conflict.

“Comments from President Trump have triggered speculation that the U.S. will get more involved in the conflict between Iran and Israel that escalated significantly five days ago,” analysts at ANZ noted.

Asian Markets: Winners and Losers

Despite the geopolitical cloud, some major Asian indices posted gains:

• Japan’s Nikkei 225 rose 0.9% to close at 38,885.15
• Topix gained 0.77%, ending the day at 2,808.35
• South Korea’s Kospi advanced 0.74% to 2,972.19, while the Kosdaq climbed 0.53% to 779.73

Japan’s May exports dropped 1.7% year-over-year, beating expectations of a 3.8% decline. However, the data reflects growing concerns about the country’s trade-driven growth outlook, especially after the Bank of Japan warned of a slowdown in global and domestic corporate activity.

Other regional performances were more muted:

• Australia’s S&P/ASX 200 slipped 0.12%, finishing at 8,531.2
• Hong Kong’s Hang Seng Index dropped 1.12% to 23,710.69
• China’s CSI 300 edged up 0.12%, closing at 3,874.97

Wall Street Weak Ahead of Fed Decision

Overnight, U.S. markets closed in the red as traders turned cautious ahead of the Federal Reserve’s interest rate decision due later today:

• Dow Jones Industrial Average fell 299.29 points (0.70%) to 42,215.80
• S&P 500 slipped 0.84% to 5,982.72
• Nasdaq Composite dropped 0.91% to 19,521.09

U.S. stock futures also traded slightly lower in Asia, reflecting the global market’s wait-and-watch approach.

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Looking Ahead

With global markets reacting to both rising geopolitical risks and central bank policy shifts, volatility is likely to remain elevated. Investors are now closely watching the Fed’s tone and projections, which could offer cues on whether rate cuts are still on the table for 2025.

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Gold prices remained largely unchanged on Wednesday, June 18, as investors adopted a cautious stance ahead of the US Federal Reserve’s key policy announcement. A mix of geopolitical uncertainty and soft US economic indicators kept bullion prices in a narrow range globally, while domestic markets saw a mild correction.

Gold Holds Ground in Global Markets

In the international market:

• Spot gold held steady at $3,388.04 an ounce (as of 03:41 GMT)
• US gold futures traded around $3,406.50 per ounce

The market’s focus is squarely on the Fed’s interest rate outlook. While a rate pause is widely expected, any dovish hints about future rate cuts in 2025 could provide a strong tailwind for gold.

“Gold prices remain volatile as markets await clearer signals on what action the U.S. may take amid rising tensions between Iran and Israel,” said Aksha Kamboj, Vice President, India Bullion and Jewellers Association.

Domestic Gold Prices Dip on Profit Booking

In India, gold extended losses for the second straight day due to profit booking:

• 22-carat gold: ₹92,500 per 10 grams
• 24-carat gold: ₹1,00,910 per 10 grams
  (Source: Goodreturns)

Despite the pullback, analysts say domestic prices are finding support due to a weaker rupee, which offsets some of the international softness.

“Gold has near-term support at ₹98,920–₹98,590 and resistance around ₹99,950–₹1,00,000 per 10 grams,” said Rahul Kalantri, VP Commodities, Mehta Equities.

Fed Policy & US Data: What to Watch

Recent US economic indicators have sparked renewed speculation around monetary easing:

• Retail sales fell more sharply than expected
• Housing and industrial production also showed weakness

These trends bolster the case for rate cuts later in 2025, which traditionally support gold by lowering the opportunity cost of holding the non-yielding asset.

“Tepid US data strengthens the case for rate cuts,” noted analysts at ANZ, adding that Middle East risks are also keeping gold prices supported.

Middle East Tensions Add to Market Jitters

Geopolitical risk remains a key driver of gold sentiment. Iran and Israel exchanged fresh missile attacks on Wednesday, now marking six consecutive days of open conflict. The U.S. is reportedly stepping up its military presence in the region, raising the threat of broader escalation.

This has kept safe-haven demand for gold intact despite a lack of strong momentum in prices.

Gold ETF Demand Shows Positive Signs

The SPDR Gold Trust, the world’s largest gold-backed ETF, saw a 0.43% increase in holdings on Tuesday (June 17), suggesting continued institutional interest.

Meanwhile, Goldman Sachs remains bullish on the long-term outlook for bullion:

• $3,700 per ounce by end-2025
• $4,000 by mid-2026, driven by central bank demand and ETF inflows

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Conclusion

With global uncertainty on the rise and expectations of a more dovish Fed policy later this year, gold is likely to remain in focus. While near-term volatility may persist, the broader outlook remains constructive—particularly for long-term investors.

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BSE Ltd witnessed a sharp drop of up to 6.1%, hitting an intraday low of ₹2,500 on the National Stock Exchange, following regulatory changes by SEBI regarding expiry day scheduling for derivatives. However, the stock rebounded shortly after the dip.

Why Did BSE Shares Fall?

The decline came after SEBI approved the proposal to change BSE’s F&O expiry day to Thursday, aligning it with global market norms. Meanwhile, NSE has secured Tuesday as its expiry day. This shift could impact BSE’s market share in derivatives trading, prompting caution among brokerages.

Motilal Oswal Downgrades BSE

In response, Motilal Oswal downgraded BSE to a ‘Neutral’ rating, cutting its target price by 14% to ₹2,300, signaling limited upside from current levels. The brokerage expressed concerns over BSE’s shrinking market share due to the revised expiry calendar.

“We estimate BSE’s market share could drop to 18–19% from 22.6% in May 2025,” said Motilal Oswal, citing recent trends and data from the derivatives market post the March 2025 F&O regulation changes.

According to their data:

• On Wednesday and Thursday (influenced by Nifty expiry), BSE’s market share averaged around 8%.
• On Friday, Monday, and Tuesday, its premium turnover market share was higher: 21%, 24%, and 38%, respectively.

BSE CEO Defends Thursday Expiry

BSE MD & CEO Sundararaman Ramamurthy clarified that the decision to shift to Thursday expiry was taken in the best interest of market participants, especially with NSE requesting Tuesday. He highlighted that Thursday aligns with global trading algorithms and allows investors more time during the week to structure their strategies.

“Thursday expiry has supported market growth historically and fits better with the weekly trading rhythm,” Ramamurthy added.

What Happens Next?

The expiry change will apply only to contracts expiring after September 1, 2025. Existing contracts, including long-dated index options, will be adjusted accordingly. Exchanges will release detailed circulars soon to guide market participants through the transition.

SEBI also reiterated that exchanges must seek prior approval before introducing or modifying contract expiry or settlement days.

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Strong Q4 Performance by BSE

Despite the regulatory overhang, BSE delivered a robust Q4 FY25 performance:

• Net Profit: ₹494 crore (vs. ₹107 crore YoY) – a 5x jump
• Revenue: ₹846.6 crore – up 75% YoY

The board also declared a ₹23 per share dividend, including a ₹5 special dividend. The record date was May 14, and payment will be completed by September 18, 2025.

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Stock Performance Snapshot

• Last 5 sessions: Down 7.8%
• 1-month return: +6%
• 3-month return: +91%
• 1-year return: +189.5%

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Final Word

While regulatory shifts may create near-term volatility, BSE’s strong financials and strategic alignment with global markets could offer long-term stability. Investors should keep an eye on how trading volumes evolve under the new expiry framework.

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Indian defence stocks surged on June 17 as the conflict between Israel and Iran intensified, fuelling expectations of increased global and domestic defence spending. The Nifty Defence Index climbed over 1.3% to hover around 8,982, with major gainers including Mazagon Dock Shipbuilders, Data Patterns, and Bharat Dynamics.

This latest upmove extends a period of heightened investor interest in the defence sector, sparked initially by India’s ‘Operation Sindoor’—a targeted military operation against terror outfits in Pakistan in May. Since then, a series of global flashpoints, including the ongoing Russia-Ukraine war and now the Iran-Israel standoff, have kept defence-related stocks in the spotlight.

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What’s Driving the Surge in Defence Stocks?

Several factors are converging to drive momentum in the sector:

• Increased geopolitical tensions globally, particularly in the Middle East.
• Post-Operation Sindoor optimism, which boosted domestic defence sentiment.
• Anticipated rise in defence allocations by the Indian government.
• Strong export pipeline targets and indigenous manufacturing push.

“Defence stocks have seen strong swings—from sharp rallies post-Operation Sindoor to intermittent profit booking, and now a rebound amid Middle East unrest,” said Ajit Mishra, SVP, Research at Religare Broking. “The sector is benefiting from a combination of short-term catalysts and long-term structural drivers, including India’s push for self-reliance in defence and rising global demand.”

However, Mishra also cautioned that sharp price gains have led to valuation concerns, warning of potential near-term volatility. He advised investors to focus on companies with solid order books, strong execution capabilities, and healthy financials.

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Expert Outlook: Long-Term Potential vs Short-Term Risks

Sankhanath Bandyopadhyay, Economist at Infomerics Valuation and Ratings, expects India’s defence spending to rise from around 2% of GDP to 3–4% over the next decade. He noted, “With a target of ₹25,000 crore in defence exports by FY26, there is considerable potential in export-oriented companies. However, investors must evaluate fundamentals and mix growth with dividend yield when investing.”

Robin Arya, founder of GoalFi, echoed a similar sentiment, saying, “Even after the sharp re-rating, we remain selectively bullish. The Nifty Defence Index rallied 18% in May alone, adding ₹1.8 lakh crore in market cap. This isn’t just speculative—it’s backed by a ₹16 lakh crore procurement pipeline and a ₹3 lakh crore export target by 2029.”

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Top Gainers in the Defence Space

• Mazagon Dock Shipbuilders: Jumped nearly 5% to ₹3,322, snapping a four-day losing streak.
• Data Patterns: Rose over 2.5% to ₹3,035.
• GRSE & Bharat Dynamics (BDL): Gained more than 2% each.
• Cochin Shipyard: Up by 1.7%.
• DCX India, Paras Defence, BEML: Gained over 1% each.
• HAL, BEL, Solar Industries, Cyient DLM, Astra Microwave: Posted marginal gains.

However, Zen Technologies and a few others bucked the trend, closing in the red.

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Middle East Escalation Adds Fuel to the Fire

Tensions between Iran and Israel have continued to escalate, with both sides reportedly exchanging missile strikes and significant casualties being reported. In a controversial series of posts, former U.S. President Donald Trump warned of potential American involvement and urged civilians to evacuate Tehran.

“Iran should have signed the deal. Simply stated, IRAN CAN NOT HAVE A NUCLEAR WEAPON,” Trump wrote on Truth Social, hinting at possible U.S. military action. He also denied claims from French President Emmanuel Macron about efforts toward a ceasefire, calling them “publicity seeking.”

The geopolitical uncertainty has not only rattled global markets but also added to the case for rising defence demand worldwide.

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Bottom Line: Structural Strength Meets Tactical Momentum

While defence stocks remain volatile and potentially overvalued in the near term, analysts agree on the sector’s long-term strength. Between a ramp-up in domestic manufacturing, a growing export opportunity, and an increasingly uncertain global landscape, India’s defence sector continues to attract investor interest.

Key takeaway? Stay selective, focus on fundamentals, and think long-term.

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Indian stock markets closed in the red on Tuesday, June 17, dragged down by profit booking in heavyweight stocks and weak global cues. Both benchmark indices—Sensex and Nifty 50—slipped as investors turned cautious ahead of key global events.

The Sensex lost 213 points, or 0.26%, to settle at 81,583.30, while the Nifty 50 declined by 93 points, or 0.37%, to close at 24,853.40.

Mid- and Small-Caps Under Pressure

Broader markets saw deeper cuts. The BSE Midcap index dropped 0.56%, and the Smallcap index fell 0.67%, reflecting broader selling across the board. As a result, the total market capitalisation of BSE-listed companies dropped by over ₹2.5 lakh crore, sliding from nearly ₹450.5 lakh crore in the previous session to ₹448 lakh crore.

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What Triggered the Market Decline?

The sell-off was largely driven by:

• Geopolitical tensions: Rising fears of an escalation in the Middle East, particularly between Israel and Iran, rattled global sentiment.
• Cautious stance ahead of the Fed meeting: Investors chose to stay on the sidelines before the U.S. Federal Reserve’s key interest rate decision scheduled for June 18.
• Rising crude prices: Brent crude spiked due to geopolitical tensions, a worrying sign for India given its high dependence on oil imports, which could weigh on corporate earnings.

“The benchmark equity index experienced moderate losses amid rising risk of an escalation of conflicts in the Middle East ahead of the FOMC meeting. This uncertainty pushed Brent crude prices higher—an unfavourable development for India, given its heavy reliance on oil imports, thereby dampening earnings growth,” noted Vinod Nair, Head of Research at Geojit Financial Services.

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Nifty 50: Top Gainers

Out of 50 stocks, only 11 managed to stay in the green. The top performers included:

• Tech Mahindra: +1.66%
• Infosys: +0.87%
• Asian Paints: +0.86%

Wipro ended the session flat.

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Nifty 50: Top Losers

The biggest drags on the index were:

• Adani Enterprises: -2.31%
• Eicher Motors: -2.06%
• Dr. Reddy’s Laboratories: -2.00%

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What to Watch Next

All eyes are now on the U.S. Federal Reserve’s policy decision, which could set the tone for global markets in the coming days. Investors are also keeping a close watch on geopolitical developments that continue to inject volatility into the markets.

Stay tuned for more updates as the market reacts to key global and domestic triggers.

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