Indian benchmark indices traded almost flat in early deals on Thursday as crude oil prices remained above $100 a barrel amid escalating tensions in the Middle East.
Weakness in IT and auto stocks weighed on sentiment, while investors remained cautious ahead of key US inflation data that could influence the Federal Reserve’s next policy move.
At 10:36 am IST, the BSE Sensex was down 10.29 points, or 0.01%, at 74,753.94. It had opened at 74,742.54. The Nifty 50 was marginally higher by 1.35 points, or 0.01%, at 23,432.85 after beginning the session at 23,446.60.
Brent crude was quoted at $101.05 a barrel, while WTI crude stood at $96.12. Rising oil prices have become a major concern for India as the intensifying Middle East conflict threatens to fuel inflation, widen the country’s import bill and squeeze corporate margins.
Iran has claimed that its forces attacked 10 ships near the Strait of Hormuz after the US sank five Iranian oil tankers, adding to uncertainty around one of the world’s most important oil transit routes.
Markets are also focused on US inflation data, which could shape expectations for the Federal Reserve’s policy decision next week. A further rise in energy prices could intensify inflationary pressures and reduce the scope for monetary easing.
“The undertone of markets remains fragile as Brent crossed the $100 per barrel mark amid escalating US-Iran tensions, intensifying concerns over inflation and growth,” said Rajesh Palviya, head of research at Axis Direct.
IT, AUTO STOCKS LEAD DECLINE
IT and automobile stocks remained under pressure during early trade. The Nifty IT index declined 0.06%, while the Nifty Auto index fell 0.60%.
HCLTech emerged as the biggest Sensex laggard, declining 1.19%. M&M dropped 0.98% and IndiGo fell 0.94%. Maruti was down 0.48%, while Sun Pharma and Reliance Industries declined 0.44% and 0.42%, respectively.
Asian Paints and Tata Steel each fell 0.32%, while BEL declined 0.30%. Adani Ports was down 0.29% and Trent slipped 0.26%.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the market’s technical setup had weakened after the Nifty moved below the 23,500 resistance level.
“With Nifty dipping below the 23500 resistance, the market construct has turned weak. Technically the market is vulnerable to further correction, and the fundamental macro trends continue to deteriorate,” he said.
Vijayakumar noted that Brent crude had climbed above $101 while the US 10-year yield had risen to 4.83%. He said expectations of a US rate hike this month had also increased, adding to pressure on equities.
A prolonged period of crude above $100 could hurt India’s economic growth and corporate earnings, he warned. Aviation, paints, adhesives, tyres and chemical companies could face particular pressure because of their exposure to energy costs.
PSU BANKS, MEDIA GAIN
Not all sectors followed the broader cautious trend.
The Nifty PSU Bank index gained 0.92%, while the Media index rose 0.84%. Financial Services 25/50 advanced 0.16%, Private Bank gained 0.22% and Oil & Gas rose 0.24%.
PowerGrid was the strongest Sensex performer, climbing 1.22%. Axis Bank gained 1.06%, while Tech Mahindra rose 0.84%. SBI advanced 0.72%, Bajaj Finance gained 0.66% and Titan added 0.46%.
NTPC was up 0.39%, Bajaj Finserv gained 0.31% and HDFC Bank rose 0.15%. Infosys edged 0.13% higher, while Bharti Airtel and ITC gained 0.12% and 0.11%, respectively.
BROADER MARKET REMAINS UNDER PRESSURE
The broader market continued to show weakness.
The Nifty 100 declined 0.07%, while the Nifty 200 and Nifty 500 each fell 0.13%. The Nifty Midcap 50 dropped 0.40% and the Nifty Midcap 100 declined 0.35%. The Nifty Smallcap 100 was down 0.06%.
India VIX, however, eased 0.71% to 11.84.
Vijayakumar said defensive sectors such as FMCG, pharmaceuticals and healthcare could outperform relatively as market uncertainty persists. He added that large private-sector banks may remain technically weak in the near term, but their strong fundamentals could make them attractive for long-term investors.
OIL, INFLATION DATA TO SET MARKET DIRECTION
Investors are likely to keep a close watch on developments in the Middle East and the trajectory of crude oil prices, with Brent remaining above the psychologically important $100 mark.
The upcoming US inflation reading will also be crucial, as it could influence expectations around the Federal Reserve’s interest-rate decision.
For Indian equities, the combination of expensive crude, elevated US bond yields and uncertainty over global monetary policy is likely to keep volatility and caution elevated in the near term.
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