On the domestic front, investor sentiment took a hit due to concerns over rising oil import costs and lingering global uncertainty. Persistent selling by foreign institutional investors (FIIs) contributed to the downward pressure, driven by elevated U.S. bond yields and a stronger dollar, which triggered capital outflows.
While domestic macro indicators, including further easing in inflation, offered some comfort, the broader caution in global markets continued to overshadow the positive data.
“The Nifty slipped sharply, breaching the 21-EMA—a key short-term moving average. However, it found support near the recent consolidation lows, leading to a strong intraday recovery. Going forward, the recovery could gain traction if the Nifty sustains above the 24,700 level. On the upside, the index may move towards 25,000 in the short term. Conversely, a decisive fall below 24,700 could trigger renewed bearish bets in the market,” Rupak De, Senior Technical Analyst at LKP Securities.
Factors that are likely to impact movement when markets reopen this week:
1. US Fed meeting outcome:
The U.S. Federal Reserve’s upcoming policy decision will be closely tracked, as market participants look for clarity on the timing and magnitude of potential rate cuts, especially in light of mixed economic signals.
2. Geopolitical tensions:
Tensions between and Israel and Iran are likely to be closely monitored by the market participants.
3. FII activity:
The trend in foreign institutional investor (FII) flows will also be closely monitored. On Friday, foreign institutional investors (FIIs) were net sellers at Rs 1,233.47 crore, while the domestic institutional investors (DIIs) were net buyers at Rs 2,906.13 crore.
4. Technical factors:
“Technically, the Nifty has re-entered its consolidation range, and a decisive move beyond the 24,400–25,200 zone will be required to establish the next directional trend. In the event of a breakdown, the 24,000 level is expected to act as a crucial support, whereas a breakout above 25,200 could trigger a sustained rally toward the 25,600 mark,” said Ajit Mishra – SVP, Research at Religare Broking.
He also noted that the banking index, which plays a key role in market sentiment, has failed to hold its breakout above the 56,000 mark and is now expected to find support in the 54,000–54,600 range. A decisive move above 56,500 will be essential to revive momentum in the financial space.
5. Crude prices
Crude oil futures surged over 10% to $76 per barrel, the highest in two months and logged the biggest single-day rally in the last 5 years, as escalating tensions between Israel and Iran sparked fears of severe supply disruptions. With Israel launching a pre-emptive strike and Iran vowing retaliation, including potential attacks on US bases, the threat to the Strait of Hormuz, a key global oil artery, looms large.
“Supporting the price rally, U.S. crude inventories fell more than expected, signalling robust demand. Additionally, weaker U.S. inflation data reinforced expectations of a Fed rate cut by September, potentially lifting future oil demand,” said Rahul Kalantri, VP Commodities at Mehta Equities.
“In the international market, WTI crude oil prices are expected to find support near $70, with resistance at $74.80. Domestically, key levels are seen at ₹6,100 for support and ₹6,480 as resistance,” he noted.
6. INR movement
Rupee traded very weak below 86.05, down by 0.52 rupees, despite a softer dollar index, as risk sentiment deteriorated sharply following Israel’s attack on Iran. The escalation in Middle East tensions pushed WTI crude prices above $74, marking a 9% surge, which added significant pressure on the rupee.
Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, said that the currency is expected to trade in a volatile range between 85.60 and 86.50 in the near term.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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