January 3, 2020 / 5:18 AM / 25 days ago

Indian shares slip as oil jumps after U.S. air strikes in Mideast

* Oil refiners BPCL, Reliance fall; ONGC rises

* IT services stocks rise as rupee weakens

* Paints producers, airline stocks fall

By Sachin Ravikumar and Philip George

BENGALURU, Jan 3 (Reuters) - The Indian rupee weakened and shares slipped on Friday as oil prices surged after U.S. air strikes killed a top Iranian commander, intensifying geopolitical tensions in the Middle East.

Other Asian markets also stumbled following news of the air strikes, in which the head of Iran’s elite Quds Force and a top Iraqi militia leader were killed early on Friday at Baghdad airport.

Oil prices surged, reflecting concerns that escalating Middle East tensions may disrupt oil supplies. Brent crude futures jumped to their highest since Sept. 17 and were last up 2.88% at $68.16 a barrel.

The rupee weakened by 0.26% to 71.5525 against the dollar. India, the world’s third-biggest oil consumer, imports about 80% of its oil needs, making it highly susceptible to crude price swings.

“Iran will certainly retaliate ... Oil is likely to be on boil. Bad for large oil importing countries, especially those with large trade and current account deficit like India,” said Ajay Bodke, chief executive of portfolio management services at Prabhudas Lilladher Pvt Ltd in Mumbai.

“Risk aversion would spike sharply. Investors may again find comfort in mega-caps and shun ‘risky’ small- and mid-cap equities.”

India’s NSE Nifty 50 index, which tracks blue-chip equities, was down 0.35% to 12,239.50 by 0425 GMT, while the benchmark S&P BSE Sensex fell 0.28% to 41,512.38.

Shares in oil refining, retail and telecoms group Reliance Industries Ltd, India’s largest company by market value, fell 0.7%, on concerns of falling margins due to the rise in oil prices.

State-run oil producer Oil and Natural Gas Corp and gas suppliers GAIL gained roughly 2.4% each.

Shares in India’s top two airlines also slumped due to the surge in oil prices. InterGlobe Aviation Ltd fell 1.8%, while SpiceJet Ltd shed 4.4%.

Asian Paints Ltd, a Nifty 50 component, fell 1.4%.

Shares in IT services companies, which receive a bulk of their revenue from overseas and benefit from a weaker rupee, gained. Infosys Ltd and Wipro Ltd climbed 1.5% each, while Tata Consultancy Services rose 2.3%.

Meanwhile, India’s central bank on Thursday announced another simultaneous purchase and sale of government bonds, the third such operation in recent weeks, moves seen as an attempt to bring longer-term yields lower. (Reporting by Sachin Ravikumar; Additional reporting by Uttaresh.V; Editing by Subhranshu Sahu)

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