Indian equity indices are expected to open lower on Monday, influenced by a significant drop in GIFT Nifty futures and escalating geopolitical tensions. GIFT Nifty Futures on the NSE International Exchange were down 207.90 points, or 0.86 per cent, trading at 24,034, signaling a cautious start for domestic investors.
Geopolitical Tensions and Oil Prices Impact
The primary driver behind the negative sentiment is the renewed fighting in the Middle East, specifically involving US and Iranian forces. Iran's claims of closing the vital Strait of Hormuz have pushed crude oil prices higher, adding pressure to global markets. Brent crude climbed 4.1 per cent to $79.11 a barrel, up from a recent low of $70.14, while US crude also rose 4.1 per cent to $74.37 a barrel. This surge in oil prices has also impacted the bond market, with 2-year Treasury yields reaching their highest since early 2025 at 4.2393 per cent, firming the dollar index at 101.13 and causing non-interest bearing gold to slip 1.1 per cent to $4,076.
Global Market Performance
- Asian markets largely slid on Monday, with South Korea's KOSPI crashing over 5 per cent and Japan's Nikkei dropping 1.5 per cent. Hong Kong's Hang Seng, however, gained nearly half a per cent.
- In contrast, US stocks ended higher on Friday as investors anticipated the upcoming quarterly earnings season. The S&P 500 climbed 0.42 per cent, the Nasdaq gained 0.29 per cent, and the Dow Jones Industrial Average rose 0.29 per cent.
FII-DII Flows and Domestic Fundamentals
Provisional data indicates that Foreign Portfolio Investors (FPIs) were net sellers of domestic stocks on Friday, offloading Rs 2,603.72 crore. Conversely, Domestic Institutional Investors (DIIs) were net buyers, injecting Rs 2,019.68 crore into Indian equities. Despite Friday's FPI selling, FPIs have been net buyers in July so far, pouring over Rs 15,157 crore after four months of outflows. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, highlighted a significant trend of increasing debt flows from FPIs, attributing it to recent government tax changes that have made Indian debt investments more attractive and contributed to rupee stability.
Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, noted that Indian equity markets are expected to sustain a gradual upmove, supported by strong domestic fundamentals and improving global cues. He also cited 18 agreements signed between India and Australia as a further boost to long-term sentiment.
Nifty50 and Sensex Outlook
The market found support near the 50-day Simple Moving Average (SMA) at 23,800/76,100 and bounced back. Amol Athawale, VP of Technical Research at Kotak Securities, suggests a level-based trading strategy given the current volatile and non-directional short-term market texture. He identifies the 20-day SMA at 24,000/77,000 as a key support zone.
- Upside Potential: An uptrend could see the market move towards 24,400-24,500/78,000-78,300, potentially extending to 24,700/78,700.
- Downside Risk: A fall below 24,000/77,000 could retest 23,800/76,100 (50-day SMA). A breach of this level might lead to 23,600-23,500/75,600-75,500.
Choice Equity Broking observed that Nifty50 formed a doji-like candlestick pattern on the weekly chart, indicating indecision within a sideways range. Immediate resistance is at 24,500 and 24,600, while support lies at 23,800 and 23,700. Rupak De, Senior Technical Analyst at LKP Securities, noted that India VIX has slipped below its 200-day moving average, signaling easing market fear and a favorable near-term sentiment for bulls.
Nifty Bank Outlook
Nifty Bank continues to trade above its key moving averages, maintaining a positive upward slope, with the daily RSI nearing the 60 level, indicating improving bullish momentum, according to Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities. He identifies the 58,500-58,600 zone as an immediate hurdle, with a sustained breakout potentially leading to 59,200.
- Support: The 57,400-57,300 zone (20-day EMA) is expected to offer strong support.
- Consolidation: Bajaj Broking Research suggests the index may consolidate between 56,500 and 58,700.
- Breakout: A move above 58,700 could signal a resumption of the uptrend towards 59,200 and 60,000 in the coming weeks.
- Weakness: A fall below 56,550 could open downside towards 55,500-55,000.
While near-term volatility may persist due to developments in West Asia and fluctuations in crude oil prices, experts advise investors to maintain disciplined position sizing, avoid excessive leverage, and adhere to prudent risk management practices.