Stock Market Today: Middle East Tensions, Crude Oil Surge May Keep Dalal Street Under Pressure; Nifty, Bank Nifty Levels to Watch
JAIPUR: Indian equity markets could remain cautious on Friday as renewed tensions in the Middle East and a sharp rise in crude oil prices have once again raised concerns over global risk sentiment.
The latest developments around the US-Iran conflict and concerns over shipping through the Strait of Hormuz have pushed crude oil prices higher. Brent crude has moved towards the $95-per-barrel mark, adding to concerns for oil-importing economies such as India.
The rise in crude, along with movements in the US dollar and Treasury yields, could keep volatility elevated in global as well as domestic markets. GIFT Nifty has also indicated a weak start for Indian equities.
However, continued buying by foreign institutional investors (FIIs) remains one of the key positives for the domestic market.
Middle East Tensions Put Investors on Alert
The latest escalation in the Middle East is no longer just a geopolitical concern. Its impact is being felt directly across global energy markets.
The Strait of Hormuz is one of the world's most important oil shipping routes. Any prolonged disruption to shipping through the region can raise concerns about global crude supplies and push oil prices higher.
Recent developments involving the US and Iran have increased uncertainty around commercial shipping in the region. Lower shipping activity through the Strait of Hormuz has added to concerns about potential supply disruptions.
For equity markets, the bigger concern is what sustained higher crude prices could mean for inflation.
If oil remains expensive for a prolonged period, it could make it harder for central banks to ease monetary policy. This could keep investors cautious towards equities, particularly in markets that are heavily dependent on imported crude.
Crude Oil Becomes the Biggest Concern for India
The sharp rise in crude oil prices is particularly important for India because the country imports a large part of its crude oil requirements.
Higher oil prices can increase India's import bill and put pressure on the rupee. They can also increase input costs for several industries.
Sectors such as aviation, paints, tyres, chemicals and logistics could feel the impact if crude remains elevated for an extended period. On the other hand, upstream oil companies can benefit from higher crude prices.
This means that a sustained rise in oil prices could result in a mixed impact across sectors rather than affecting the entire market in the same way.
FII Buying Offers Some Relief
Despite the pressure from global markets, foreign institutional buying remains a positive factor for Indian equities.
FII inflows into Indian equities were strong in August, with around $3.1 billion coming into the market. This was the strongest monthly inflow since September 2024. July also saw FII inflows of around $2.1 billion.
However, investors should not assume that continued FII buying means volatility is over. A sharp change in crude prices, US Treasury yields or global risk sentiment can quickly influence foreign flows.
At the same time, heavy call writing in the derivatives market suggests that the upside may remain capped around important resistance levels.
US Dollar and Treasury Yields Remain Important
The movement of the US dollar and Treasury yields will also remain important for Indian markets.
Higher crude prices can increase inflation concerns, which in turn can influence expectations around US interest rates. Rising Treasury yields can also put pressure on equity valuations.
However, recent comments from Federal Reserve Governor Christopher Waller helped ease some concerns around a possible rate hike. US Treasury yields and the dollar subsequently weakened, supporting precious metals.
This means investors will also be watching upcoming US economic data closely. Employment and inflation data could provide further clues about the Federal Reserve's next move.
Gold and Silver Also in Focus
Gold normally attracts safe-haven demand when geopolitical tensions rise. However, the relationship has been slightly more complicated this time.
A stronger dollar and higher Treasury yields initially put pressure on gold and silver. But as expectations around US rate hikes changed, precious metals recovered.
Spot gold rose around 2.3% to $4,488.54 an ounce on Thursday, while silver also gained around 2.8%.
This makes the relationship between gold, the dollar and US Treasury yields an important one to watch in the coming sessions.
Nifty Technical Outlook: 24,424-24,531 Key Resistance
According to the technical view cited in the market note, Nifty's first important resistance zone is placed between 24,424 and 24,531.
On the downside, the immediate support zone is seen between 24,261 and 24,193.
FII buying continues to provide some support to the market, but heavy call writing and weakness in the AI-related theme could keep volatility high.
If Nifty manages to sustain above the resistance zone, sentiment could improve further. However, a break below the support zone could increase selling pressure.
Nifty IT Remains a Sector to Watch
Nifty IT could remain an important sector to watch in the current market.
Weakness in global technology stocks and changing investor sentiment towards the AI theme could influence Indian IT stocks. Movements in the rupee and signals from the US economy will also remain important for the sector.
Therefore, any sharp movement in IT stocks could have a meaningful impact on the broader index.
Bank Nifty Outlook: 58,000 Level Remains Crucial
Bank Nifty's first resistance is placed between 58,512 and 58,640. Above this, the next major resistance zone is between 58,891 and 59,067/59,273.
On the downside, the first support base is seen between 58,010 and 57,810, while the larger support zone lies between 57,530 and 57,415.
Bank Nifty has remained under pressure around its 10-DMA over the past 10-12 sessions. However, the presence of put writers around the 58,000 level is providing some support.
As long as the index holds above the first support base, the overall structure remains relatively strong. However, if Bank Nifty settles below 57,810, the probability of a move towards the second support base could increase.
On the upside, call writing around 58,500 remains a significant hurdle. A sustained move above this zone would therefore be important for a stronger recovery.
What Should Investors Watch Now?
For investors, the biggest question is not simply whether Nifty opens higher or lower. The more important factor is how long the Middle East tensions and crude oil surge continue.
If geopolitical tensions ease and crude prices start cooling, global risk sentiment could improve. But if shipping disruptions around the Strait of Hormuz continue for longer, concerns around crude prices, inflation and interest rates could remain a problem for markets.
In such an environment, investors may need to focus more on key support and resistance levels instead of taking aggressive positions based purely on market sentiment.
FII buying remains encouraging, but global cues are still likely to play a major role in deciding the direction of Indian equities.
Aurelius Business View
For Dalal Street, the bigger concern at present is not the geopolitical tension alone but its impact on crude oil prices.
If crude remains elevated, inflation and interest-rate expectations could once again become a concern for equity markets. On the other hand, continued FII buying is providing an important cushion to Indian equities.
For now, the market appears better placed for a period of higher volatility and range-bound movement rather than a clear one-way trend.
For Nifty, the 24,193-24,261 zone will remain important on the downside, while 24,424-24,531 is the key resistance area. In Bank Nifty, 57,810 remains an important level to watch.
A sustained hold above these support levels could keep recovery hopes alive, while a break below them could increase selling pressure.
Disclaimer: This article is based on available market information and technical market views. It should not be considered investment advice. Investors should consult their financial adviser before taking any trading or investment decisions.
