The Indian stock market is expected to open lower on Tuesday as the global markets faced significant sell-offs.
The domestic equity benchmarks, Sensex and Nifty 50, will likely see losses, following the trend from Asian and US markets.
Technology stocks took a hit globally, while traders revised their expectations regarding future interest-rate cuts by the US Federal Reserve, impacting investor sentiment.
Global market sell-off weighs on Indian stocks
US and Asian markets experienced sharp declines, with US tech stocks leading the losses.
The Dow Jones Industrial Average plunged by 398.51 points, while the Nasdaq dropped 1.18%.
These declines come on the heels of a strong US jobs report, which diminished the likelihood of another super-sized rate cut by the US Fed.
Investors now anticipate a 25-basis-point rate cut, with only a 14% chance that the Fed will not cut rates at all, according to CME’s FedWatch tool.
Asian markets also mirrored the US market losses, with Japan’s Nikkei 225 declining by 0.75%, and South Korea’s Kospi dropping by 0.61%.
In contrast, Chinese markets jumped 10% after reopening from a long holiday. Hong Kong’s Hang Seng Index, however, declined by more than 3%.
FII outflows and rising crude oil prices impact Indian markets
On Monday, the Indian stock market faced its sixth consecutive session of losses, with the Sensex plunging by 638.45 points to close at 81,050.00, and the Nifty 50 settling 218.85 points lower at 24,795.75.
The sharp fall in Indian equities can be attributed to a significant outflow of ₹30,700 crore by foreign institutional investors (FIIs) over the first three days of October, coupled with rising crude oil prices.
Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, noted that the recent FII outflows, alongside rising crude oil prices, have created negative sentiment in the market.
Khemka added that the focus this week will be on the Reserve Bank of India’s (RBI) monetary policy outcome and the start of the Q2 FY25 earnings season, which will influence market direction in the coming sessions.
Key indicators and earnings reports to guide market outlook
Looking forward, analysts suggest that the RBI’s upcoming policy decision will be pivotal in determining the near-term trajectory of the Indian stock market.
Markets are closely watching whether the central bank will maintain its current stance or provide new signals on interest rate cuts.
Additionally, the start of the Q2 FY25 earnings season will provide insight into corporate performance, particularly in light of the challenges posed by rising inflation, volatile global markets, and sustained FII outflows.
The RBI is expected to announce its monetary policy decision on Friday.
While no major changes are anticipated, analysts will focus on the central bank’s forward guidance and its outlook on inflation and growth.
Tech stocks under pressure, FIIs continue selling spree
The selling pressure in global markets, particularly in tech stocks, has had a ripple effect on Indian equities.
Key US tech giants like Alphabet, Apple, and Amazon saw declines, dragging global indices lower.
In India, technology stocks could also face headwinds in the short term due to this global sentiment.
Additionally, persistent selling by FIIs remains a key concern for Indian markets, with over ₹30,700 crore of outflows witnessed in the first three days of October.
Despite these challenges, some sectors in the Indian market, particularly financials and infrastructure, may offer resilience as the government’s continued focus on infrastructure spending and the potential for stronger-than-expected Q2 earnings may support select stocks.
Oil prices and US Treasury yields add to market uncertainty
Brent crude prices fell by 0.3% to $80.70 per barrel, while US West Texas Intermediate (WTI) futures dropped to $76.94 per barrel after Monday’s rally. This decline in oil prices follows a recent spike, which had exacerbated concerns about rising costs for Indian businesses.
In addition to oil prices, US Treasury yields are also influencing global markets.
The benchmark 10-year US Treasury yield surged past 4%, reaching 4.019%, as expectations for further rate cuts diminished. This rise in yields has added to the risk-off sentiment in equity markets globally, including in India.
As the Indian stock market faces another potential day of declines, all eyes will be on the RBI’s monetary policy decision later this week and the start of the Q2 earnings season.
Global factors, including the US Fed’s stance on interest rates, oil prices, and continued FII outflows, will continue to shape the market sentiment in the near term.
Investors will be looking for signs of stabilization as Indian markets remain volatile amid global uncertainties.
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