Indian equity benchmark indices are expected to open with a gap-down on Monday, reflecting a cautious global sentiment. The GIFT Nifty Futures on the NSE International Exchange were down 104.90 points, or 0.43 per cent, trading at 24,237, signaling a soft start for the domestic market.
Global Headwinds Drive Cautious Mood
The subdued outlook is largely influenced by several international factors. Renewed military escalation between the US and Iran has reignited concerns over global energy supplies, leading to a rebound in crude oil prices. This geopolitical tension is contributing to a broader risk-off tone across Asian markets, with Korea's KOSPI crashing nearly 2.5%, and Japan's Nikkei and Hong Kong's Hang Seng falling by 1% each.
Adding to the caution, Wall Street's main indices closed lower on Friday. Investors reacted to Federal Reserve Chair Kevin Warsh's reiteration of the central bank's commitment to fighting inflation, increasing the prospects of further interest rate hikes. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all registered declines.
Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, noted that Indian equities might trade in a broader range due to a lacklustre environment, mixed global cues, and persistent geopolitical tensions. Investors are awaiting clarity on these developments, which are likely to guide market direction.
Crude Oil, Dollar, and Gold Movements
- Crude Oil: Brent futures climbed 1.4 per cent to $89.38 a barrel following reports of US forces striking Iranian launchers on Larak island, with Iran reportedly retaliating against US forces in Jordan.
- Gold: Gold saw a fractional gain, trading at $4,454 an ounce, after shedding 3.2 per cent on Friday as bond yields spiked.
- US Dollar: The dollar index ticked down slightly to 99.6, after a jump on Friday.
Ajit Mishra, SVP of Research at Religare Broking, advised investors to avoid aggressively chasing prices, suggesting instead to use meaningful declines to gradually accumulate fundamentally strong companies amidst global monetary policy uncertainty, geopolitical developments, and elevated crude oil prices.
FII-DII Flows and Market Technicals
Provisional data from NSE indicated that Foreign Portfolio Investors (FPIs) were net sellers of domestic stocks, offloading Rs 5,039.80 crore on Friday. Conversely, Domestic Institutional Investors (DIIs) were net buyers, injecting Rs 5,183.93 crore into Indian equities. Despite Friday's outflows, FPIs have remained net buyers in August, with investments totaling Rs 30,919 crore.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments, highlighted that FPI flows into India are driven by factors such as the reversal of the chip trade, rupee stability, and improving earnings growth, with a notable trend towards mid-caps and small-caps.
Nifty50 and Sensex Outlook
Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, observed a small bullish candle on Nifty's daily chart, indicating a minor bounce near the 24,000 support level. He suggested that the underlying trend remains range-bound (24,000-24,400) with a positive bias, and a sustainable bounce could push Nifty towards 24,300-24,400.
For Sensex, Hitesh Tailor, Technical Research Analyst at Choice Equity Broking, noted profit booking but maintained a sideways to mildly positive bias, as it holds above a rising trendline. Sustained trading above 77,680–78,000 could strengthen recovery, with 78,484 acting as a key hurdle.
India VIX, a measure of market volatility, declined by 3.50 per cent to 10.68, suggesting subdued volatility and potential consolidation until a decisive breakout emerges.
Nifty Bank Outlook
Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, stated that Nifty Bank formed a neutral candle, reflecting indecision. The 57,000–56,900 zone is crucial support, while 57,900–58,000 acts as immediate resistance. A decisive move above 58,000 or below 57,000 would signal the end of the current consolidation.
Vatsal Bhuva, Technical Analyst at LKP Securities, added that Bank Nifty faces selling pressure near 58,000–58,200 but holds above its 100-DMA and 200-DMA, indicating a range-bound rather than bearish structure as long as 57,000 holds.