Street smart bulls refuse to be cowed down amid turmoil in Middle East

Analysts said traders soon covered their bearish bets ahead of the weekend after there was no reaction from Iranian officials. "The markets had a gap-down opening on Friday after rumours that tensions had escalated between Iran and Israel, but after no reaction was seen in crude oil prices, the markets recovered and saw some short covering," said Sunny Agrawal, head, fundamental equity research, SBI Caps Securities.

Elsewhere in Asia, China declined 0.29%, Hong Kong fell 1%, South Korea dropped 1.63% and Taiwan slumped 3.8% on Friday.

The pan-Europe index Stoxx 600 closed about 0.1% lower. Wall Street indices were trading 0.7-1.6% lower at press time.

At home, the broader market ended weak with Nifty's Midcap 150 declining 0.5% and the Small-cap 250 falling 0.1%. Out of the 3,903 shares traded on the BSE, 1,662 advanced, while 2,127 declined.

The Sensex and Nifty had fallen 2.4% in previous four trading sessions as the conflict between Israel and Iran had led to crude prices shooting above $90 a barrel.

Worries about the tensions escalating had resulted in traders building bearish positions.

"The street saw some short covering in Nifty and Bank Nifty on Friday," said Rajesh Palviya, head of technical and derivative research at Axis Securities. "Friday was the first round of short covering and if it continues next week, we may see the confirmation of a positive momentum."

The Nifty could face a hurdle at the 22,300-22,400 level, he said.

The Bank Nifty gained 1.1% with rising 2.6%, advancing 1.2% and moving up 0.8%.

Nifty's Volatility Index, or VIX - a fear gauge - jumped 3.2% to 13.46 on Friday, suggesting traders are not entirely convinced about the index recovery. Palviya said 14 will be a crucial level for VIX.

"As long as India VIX is below 14, the market still remains bullish and we do not see the level being crossed in near term," he said.

Foreign portfolio investors bought shares worth a net Rs 129 crore. Domestic institutions were sellers to the tune of Rs 52.5 crore.

Rupee
After weakening to a new low of 83.58 to the dollar in early trade on Friday, the rupee recovered ground and ended stronger versus the US currency as the Reserve Bank of India likely intervened in the market through greenback sales to curb excessive volatility in the exchange rate.

The rupee closed at 83.47 per dollar against 83.54 at the previous close, LSEG data showed. In the initial hours of trade, the local currency had weakened to a record low of 83.58 as reports of Israeli missile strikes on Iran sparked risk aversion among investors.

"The Indian rupee recovered with the domestic equities on probable central bank intervention along with dollar supply by exporters," said Dilip Parmar, research analyst at HDFC Securities. "The rupee is expected to remain volatile within the range of 83.20 to 83.70 (per dollar) amid geopolitical uncertainty and hawkish central banks."

Early Friday reports said Israel had carried out missile strikes on Iran, marking another escalation in the conflict in the Middle East.