Dalal Street is likely to begin the holiday-shortened week with investors tracking a mix of geopolitical developments, oil prices and global financial conditions. According to analysts, developments in US-Iran diplomacy and movements in crude oil will be among the key factors determining market sentiment.The market is expected to remain cautious as geopolitical developments, crude oil prices and global bond yields continue to influence the near-term direction. Equity markets will remain closed on Friday for Mahatma Gandhi Jayanti.“Globally, developments around US-Iran diplomacy and crude oil prices will remain critical. Any progress on a framework for reopening the Strait of Hormuz could ease energy prices and provide some relief to India’s import bill and the rupee, while renewed geopolitical tensions could keep volatility elevated,” Ajit Mishra, SVP, Research, Religare Broking, said.The direction of oil prices will therefore remain closely linked to developments in the US-Iran talks. Brent crude is currently near $105–106 a barrel, a level that analysts said continues to weigh on the macroeconomic outlook.“Brent crude near $105–106 a barrel remains too elevated to provide meaningful macroeconomic relief. Progress in the US-Iran negotiations could help reduce the geopolitical premium in oil prices, while renewed escalation or supply disruptions could intensify inflationary pressures.“The US 10-year treasury yield, currently near 5.2 per cent, will remain another important constraint on global risk appetite,” Hariselvan Radhakrishnan, founder & CEO of HST Wealth, a research analyst firm, told PTI.
Bond yields, rupee under watch
Beyond crude oil, movements in global bond yields and the dollar will be another important factor for emerging markets following the Federal Reserve’s September policy decision.“Global bond yields will also remain important following the Federal Reserve’s September policy decision. Further increases in yields and the dollar could weigh on emerging-market capital flows, while a moderation in yields could provide some relief.“The rupee will remain another important factor to watch, with persistent oil-related demand for dollars and continued FII outflows potentially keeping the currency under pressure, although RBI intervention has helped contain excessive volatility,” Ponmudi R, CEO – Enrich Money told PTI.Analysts said the combination of higher oil prices, elevated yields and geopolitical uncertainty had contributed to the sharp sell-off during the middle of last week. Ponmudi said elevated yields continued to tighten global financial conditions and could reduce the relative attractiveness of emerging-market assets.Foreign institutional investor activity will consequently remain on the radar, along with movements in the rupee and global risk sentiment.
Economic data to provide market cues
Investors will also have several domestic indicators to track during the week. August industrial production data and the HSBC manufacturing PMI reading are scheduled for release, while monthly auto sales figures will also be watched.Mishra said market participants would closely monitor these indicators alongside FII activity.Siddhartha Khemka, head of research, wealth management, Motilal Oswal Financial Services, said markets would also track India’s August industrial production data and the federal fiscal deficit for cues on domestic momentum and the consolidation path.
US, eurozone data in focus
The global economic calendar will add another layer to the market outlook. A series of US economic data releases will be important for global risk sentiment, while US consumer confidence and JOLTS job openings will be watched for their implications for expectations around the global rate cycle.The eurozone’s September inflation cluster will also be on the radar as investors assess the direction of the global rate cycle.The focus on global data comes after a weak performance at the Dalal Street last week. BSE benchmark Sensex declined 399.22 points, or 0.53 per cent, while NSE Nifty50 dipped 205.9 points, or 0.88 per cent.
