Stock markets are poised to start the day with losses on Thursday, influenced by escalating crude oil prices and soft global signals that are impacting investor confidence. Brent crude oil has surpassed the $100 per barrel threshold, raising worries about inflation and economic advancement.
Early signs indicate a weak start, with GIFT Nifty futures trading at 24,138 at 8:30 am, signaling a lower opening for the Nifty 50, which had closed at 24,378.1 in the previous session.
Aakash Shah, a Technical Research Analyst at Choice Equity Broking Private Limited, anticipates a weak market open. He mentioned that Indian equity markets are likely to commence on a negative note, following the notable weakness in GIFT Nifty and cautious global trends. Presently, GIFT Nifty is hovering around 24,200, marking a decline of nearly 160 points, indicating a downward opening.
The primary reason for the sluggish market start is the substantial surge in oil prices. Brent crude has surged to approximately $102 per barrel, extending gains for the fourth consecutive session. This increase follows Iran’s seizure of two ships in the vital Strait of Hormuz, a critical global oil supply route, amid ongoing uncertainty regarding peace talks.
The mounting crude prices are a cause for concern for India, as the nation heavily relies on imported oil and gas. Prolonged escalation in prices can lead to heightened inflation and impact demand across various sectors of the economy.
Further exacerbating the situation, global brokerage firm HSBC has downgraded Indian equities to “underweight” from “neutral,” citing India’s dependence on imported energy and the potential repercussions of soaring oil prices on inflation and growth. This downgrade has contributed to a sense of caution among investors, particularly amidst prevailing global market uncertainties.
Foreign institutional investors have also adopted a cautious stance, with provisional data indicating that they offloaded shares worth Rs 2,078.36 crore on Wednesday. This marks the second consecutive day of selling after being net buyers in the preceding four sessions. Additionally, domestic institutional investors have been booking profits, intensifying the selling pressure in the market.
A decline in the markets reflects profit-taking post the recent rally, ongoing foreign institutional selling, and cautious sentiment due to evolving geopolitical circumstances and uncertainties related to earnings.