Markets Open Higher Despite Fresh US-Iran Tensions; FMCG Stocks Lead

Indian benchmark indices opened higher on Wednesday, supported by gains in FMCG and heavyweight stocks, even as investors monitored fresh geopolitical tensions following new US strikes on Iranian targets.

At around 9:30 am, the BSE Sensex was up 380 points, or 0.51%, at 74,303.78, while the NSE Nifty50 gained 96.35 points, or 0.41%, to trade at 23,338.45.

The positive start came despite renewed hostilities in West Asia after US forces reportedly carried out fresh strikes against Iranian targets in response to the downing of an American helicopter. However, the market drew comfort from relatively stable crude oil prices, which remained below recent highs.

FMCG Stocks Lead Gains

FMCG stocks emerged as the biggest contributors to the rally, helping offset weakness in broader markets.

Hindustan Unilever led the Sensex gainers with a rise of 2.11%, while Reliance Industries advanced 1.33% and Asian Paints gained nearly 1%. TCS, Kotak Mahindra Bank, ICICI Bank, State Bank of India and Infosys also traded higher.

On the other hand, Tata Steel was the top laggard, declining 0.64%, followed by Eternal, Bajaj Finserv, Maruti Suzuki and Adani Ports.

Sectorally, Nifty FMCG was the best-performing index, rising 1.29%. Nifty IT gained 0.29%, while Nifty Financial Services and Nifty Private Bank advanced 0.18% and 0.33%, respectively.

Metal stocks remained under pressure, with the Nifty Metal index falling 1.51%. Nifty Auto and Realty indices also traded in negative territory.

Broader Markets Remain Weak

Despite gains in frontline indices, broader markets underperformed.

The Nifty Midcap 100 index declined 0.35%, while the Nifty Smallcap 100 slipped 0.30%, indicating selective buying concentrated in large-cap stocks.

India VIX, the market's volatility gauge, rose nearly 1% to 15.73, reflecting continued caution among investors amid geopolitical uncertainties and persistent foreign fund outflows.

Oil prices edged higher following the latest developments in West Asia.

Brent crude futures for August traded at $92.05 per barrel, up 0.66%, while WTI crude futures gained 0.58% to $88.71 per barrel. On the MCX, June crude oil futures rose 0.89% to ₹8,496 per barrel.

However, analysts noted that crude remaining below the $93 level suggests markets are not yet pricing in a major supply disruption despite the escalation.

Global Markets Trade Lower

Asian markets remained under pressure amid renewed geopolitical concerns and continued weakness in technology shares.

South Korea's Kospi fell 1.7%, while Japan's Nikkei also traded lower. US futures indicated a weak opening, with S&P 500 futures declining 0.2%. Hang Seng futures were down 0.7%.

The weakness follows growing concerns over valuation risks in artificial intelligence-linked stocks after a prolonged rally in semiconductor and technology counters.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said investors appear to be treating the latest escalation in West Asia as an isolated event.

"The market is likely to largely ignore the escalation of the conflict in West Asia as a one-off. The softness in crude prices indicates that. Despite the escalation, Brent crude continues to trade below the $93 level," he said.

Vijayakumar added that global investors are becoming increasingly cautious about concentration risks in AI-related trades, particularly in South Korea and Taiwan. However, he noted that this has not yet translated into increased buying interest in Indian equities.

According to him, while the Nifty is fairly valued at around 20 times earnings, mid-cap and small-cap segments continue to trade at elevated valuations of 29 times and 33 times earnings, respectively. He said the valuation gap between large caps and the broader market is likely to persist until foreign institutional investors return as net buyers in Indian equities.