Foreign institutional investors turned net buyers with cash market inflows of over Rs 3,421 crore in the first week of July, even as analysts warned that geopolitical risks and India-US trade developments could keep markets volatile.
File Photo | IANS
Indian benchmark indices opened the week deep in the red on Monday as renewed hostilities between the United States and Iran unsettled global financial markets and sent crude oil prices sharply higher.
The sell-off reflected growing investor concerns over the impact of rising energy costs and geopolitical uncertainty. While analysts expect near-term volatility to persist, they say domestic factors such as improving corporate earnings and sustained buying interest could continue to support Indian equities.
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The BSE Sensex was trading at 76,899.27, down 670.12 points or 0.86 per cent. The NSE Nifty50 slipped 192.15 points, or 0.79 per cent, to 24,014.75.
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The weakness followed a sharp escalation in tensions in the Middle East after the collapse of the US-Iran ceasefire, disrupting key global energy routes and pushing crude prices sharply higher.
Brent crude climbed 4.01 per cent to USD 79.06 per barrel, while crude oil gained 4.00 per cent to USD 74.27 per barrel. Gold, meanwhile, fell 1.49 per cent to USD 4,059.73.
Ajay Bagga, banking and market expert, said Indian equities had staged a recovery last week but still ended a four-week winning streak with a marginal weekly loss.
“Indian markets recovered last week but ended a 4-week positive move with a small negative weekly performance. This morning, the Gift Nifty is pointing to a weak start,” he said.
Despite the latest correction, Bagga remained optimistic about the domestic market.
“We remain positive on Indian markets on the back of improving earnings, two years of underperformance and strong domestic flows. It remains a buy on dips market despite the clouded picture from the Persian Gulf,” he said.
Commenting on the geopolitical situation, Bagga added, “The US-Iran war escalation is more like a game of ‘who blinks first,’ but it is roiling oil and gas supplies once more and transmitting risk off to all markets.”
The negative sentiment extended across Asian markets. Japan’s Nikkei 225 dropped 1,237.73 points, or 1.81 per cent, while South Korea’s KOSPI also traded lower.
In the US, Wall Street had ended the previous session on a firmer note, with the S&P 500 rising 0.42 per cent and the Nasdaq gaining 0.29 per cent. However, Dow Jones Futures slipped 0.39 per cent in early Monday trade.
Bagga also pointed to concerns over monetary policy in the US.
“With annualised inflation hovering around a sticky four per cent, new Fed Chair Kevin Warsh signalled that interest rates–currently sitting at a restrictive range of three and a half to three and three-quarters per cent–might actually need to tick higher by year-end,” he said.
He said the hawkish policy outlook, coupled with the International Monetary Fund’s trimmed global growth forecast of 3 per cent, had increased pressure on corporate cash flows worldwide.
Vinit Bolinjkar, Head of Research at Ventura, said foreign institutional investors had turned net buyers during the first week of July, reversing the cautious trend seen towards the end of June.
FIIs recorded cumulative cash market inflows of more than Rs 3,421 crore during the period.
“This shift reflects improving sentiment amid stabilising global cues, expectations of a constructive Q1 earnings season, and selective buying in financials and autos,” Bolinjkar said.
“However, markets remain sensitive to developments in India-US trade negotiations and geopolitical risks.”
On market levels, he said Nifty could find support in the 23,700-23,800 range, while resistance is likely around 24,200-24,300.
“While the near-term trend appears constructive, we expect continued volatility… Investors should maintain a stock-specific approach, focusing on fundamentally strong large caps and sectors likely to benefit from earnings upgrades and domestic growth momentum,” Bolinjkar said.
Among individual stocks, IndiGo fell 2 per cent, Tata Steel declined 2.02 per cent, and Maruti Suzuki India slipped 1.71 per cent.
On the gaining side, Tata Consultancy Services rose 1.98 per cent, ONGC added 0.93 per cent, and NTPC advanced 0.55 per cent.
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