Crude oil, FPI flows, US data to set tone for markets this week
Indian equities are likely to remain sensitive to a mix of global and domestic developments in the coming week, with the West Asia conflict, crude oil prices, US economic data, foreign investor flows and movements in the rupee expected to remain at the centre of investor attention.
Domestic benchmarks ended the previous week on a weak note. The 30-share BSE Sensex dropped 749.08 points, or 0.96pc, while the NSE Nifty declined 277.95 points, or 1.14%.
A sharp rise in international crude prices added to the pressure on equities. Brent crude gained more than 8pc during the week, while West Texas Intermediate (WTI) crude advanced over 9pc, as renewed hostilities between the US and Iran raised concerns about energy supplies and shipping through the Strait of Hormuz.
Developments in the US-Iran conflict will remain a key risk factor for global markets. The US military said it had carried out strikes on three Iranian crude oil tankers, destroying one of them. The action came after the Islamic Revolutionary Guard Corps targeted two US Navy vessels with ballistic missiles.
Any further escalation could keep crude prices elevated and increase concerns around inflation, global growth and corporate input costs.
For Indian investors, sustained oil price gains could be particularly important because higher energy costs can put pressure on the country’s import bill, the rupee and corporate margins.
Investors will also track upcoming US employment data for clues about the Federal Reserve’s monetary policy path.
The jobs numbers could influence market expectations ahead of the Fed’s September policy decision. A stronger-than-expected labour market could reduce expectations of monetary easing, while signs of weakening employment may strengthen the case for rate cuts.
Changes in US Treasury yields and the dollar could, in turn, influence foreign flows into emerging markets such as India.
Oil prices are entering the new week after registering substantial gains. Brent crude rose 7.6pc over the week, while US crude prices climbed nearly 10pc.
US retail diesel prices also surged to a record level, highlighting the broader impact of the energy price spike.
Market participants will therefore closely monitor whether crude prices extend their rally or stabilise as geopolitical developments unfold.
Foreign investor activity will be another important domestic trigger. Foreign portfolio investors (FPIs) were net sellers of Indian equities during the first week of September, withdrawing around Rs 7,443 crore.
Higher crude prices, rising US bond yields and a stronger US dollar have weighed on risk appetite and could continue to influence overseas flows into Indian stocks.
However, Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said early signs point towards a continuation of net positive FPI flows into India in September, following positive inflows in July and August.
According to Vijayakumar, FPIs had recorded net inflows of Rs 2,374 crore into Indian equities during the first four days of September.
He also pointed to the tapering of the semiconductor-related trade and foreign investors turning consistent sellers in chip stocks in South Korea and Taiwan as factors that could be redirecting capital towards India.
Apart from FPI activity, investors will keep an eye on the rupee and domestic liquidity conditions, particularly as fluctuations in crude prices and US yields influence currency and capital flows.
Global market cues are likely to remain important for Dalal Street. Asian equities delivered a mixed performance last week as investors assessed geopolitical risks alongside sector-specific developments.
South Korea’s Kospi experienced a volatile week, including a sharp midweek sell-off triggered by escalating US-Iran tensions. The index closed at 6,687.21 on Friday, down around 1.5pc from its August 28 close of 6,788.88.
Japan, meanwhile, ended the week on a stronger note. The Nikkei 225 gained 1.28pc, supported by advances in sectors including real estate, banking and textiles.
Taiwan’s equity market also finished higher, with the Taiwan Weighted Index rising 1.61pc.
With geopolitical risks, energy prices and monetary policy expectations all moving in tandem, Indian markets could remain volatile in the week ahead. Investors are likely to track global cues alongside crude oil, FPI flows, the rupee and US economic data for signals on the direction of Sensex and Nifty.
A sharp rise in international crude prices added to the pressure on equities. Brent crude gained more than 8pc during the week, while West Texas Intermediate (WTI) crude advanced over 9pc, as renewed hostilities between the US and Iran raised concerns about energy supplies and shipping through the Strait of Hormuz.
Developments in the US-Iran conflict will remain a key risk factor for global markets. The US military said it had carried out strikes on three Iranian crude oil tankers, destroying one of them. The action came after the Islamic Revolutionary Guard Corps targeted two US Navy vessels with ballistic missiles.
Any further escalation could keep crude prices elevated and increase concerns around inflation, global growth and corporate input costs.
For Indian investors, sustained oil price gains could be particularly important because higher energy costs can put pressure on the country’s import bill, the rupee and corporate margins.
The jobs numbers could influence market expectations ahead of the Fed’s September policy decision. A stronger-than-expected labour market could reduce expectations of monetary easing, while signs of weakening employment may strengthen the case for rate cuts.
Oil prices are entering the new week after registering substantial gains. Brent crude rose 7.6pc over the week, while US crude prices climbed nearly 10pc.
US retail diesel prices also surged to a record level, highlighting the broader impact of the energy price spike.
Market participants will therefore closely monitor whether crude prices extend their rally or stabilise as geopolitical developments unfold.
Higher crude prices, rising US bond yields and a stronger US dollar have weighed on risk appetite and could continue to influence overseas flows into Indian stocks.
However, Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said early signs point towards a continuation of net positive FPI flows into India in September, following positive inflows in July and August.
According to Vijayakumar, FPIs had recorded net inflows of Rs 2,374 crore into Indian equities during the first four days of September.
Apart from FPI activity, investors will keep an eye on the rupee and domestic liquidity conditions, particularly as fluctuations in crude prices and US yields influence currency and capital flows.
Global market cues are likely to remain important for Dalal Street. Asian equities delivered a mixed performance last week as investors assessed geopolitical risks alongside sector-specific developments.
South Korea’s Kospi experienced a volatile week, including a sharp midweek sell-off triggered by escalating US-Iran tensions. The index closed at 6,687.21 on Friday, down around 1.5pc from its August 28 close of 6,788.88.
Taiwan’s equity market also finished higher, with the Taiwan Weighted Index rising 1.61pc.
With geopolitical risks, energy prices and monetary policy expectations all moving in tandem, Indian markets could remain volatile in the week ahead. Investors are likely to track global cues alongside crude oil, FPI flows, the rupee and US economic data for signals on the direction of Sensex and Nifty.
