Stock markets are set to open higher on Thursday, building on previous gains driven by lower oil prices and positive global indicators. Despite this optimistic start, potential market risks linger, influencing the day’s trading direction.
Early signs point towards a favorable opening, with GIFT Nifty futures trading at 24,317.5, indicating an uptick from Wednesday’s closing figure of 24,231.3 for the Nifty 50 index.
Aakash Shah, a Technical Research Analyst at Choice Equity Broking Private Limited, noted that the market outlook suggests a positive to range-bound commencement, backed by global cues and GIFT Nifty’s strength. However, following a recent sharp surge, the market might experience consolidation or profit taking at higher levels. Sustaining levels above 24,450–24,500 is deemed crucial for further upward momentum.
Asian markets exhibited gains, with a 0.7% increase in the broader index, mirroring a strong performance on Wall Street and improving investor sentiment globally.
In the previous session, both the Sensex and Nifty 50 surged by 1.6%, reaching a one-month high following reports hinting at potential resumption of talks between the United States and Iran in Pakistan.
Oil prices, a pivotal market factor, continue to impact trading dynamics. Brent crude was trading at $94.95, up 0.02%, while WTI crude stood at $91.44, up 0.16% at 8:30 am. Brent slipped below the $95 mark amid speculations that Iran might allow ship passage through the Strait of Hormuz, alleviating concerns over supply disruptions.
Lower oil prices bode well for India, easing import burdens, inflation, and bolstering company profits. Nonetheless, risks persist, notably the ongoing US shipping blockade in the Strait of Hormuz, with potential escalations posing upward pressure on oil prices, which had previously surged to nearly $120 per barrel due to supply fears.
Foreign portfolio investors, who had previously divested significantly during the conflict period, exhibited signs of re-entering the market. Data revealed that foreign investors purchased shares worth Rs 666 crore on Wednesday, potentially offering short-term market support if the trend continues.
Amidst a positive opening, the pivotal question remains whether the market can sustain gains. Investors are weighing positive factors like declining oil prices, prospects of reduced tensions, and FPI inflows against prevailing risks such as shipping blockades and global uncertainties.
Market trajectory could also be influenced by stock-specific movements, especially as the earnings season gains momentum. Corporate results from IT major Wipro and HDFC Life Insurance Company for the January-March quarter are eagerly anticipated, potentially impacting sector-specific stock movements.
Despite Wednesday’s robust rally, characterized by lower oil prices and enhanced global sentiment, volatility remains a potential factor. Any adverse developments regarding the Strait of Hormuz or sudden oil price spikes could swiftly alter market trajectory. Investors are advised to exercise caution even as the market opens on a positive note.