Pre-Market Update: Nifty, Sensex Likely to Open Lower as U.S.-Iran Tensions Push Crude Higher

Pre-Market Update at 7:40 AM: Gift Nifty indicated a weak opening for Indian equities on Monday, August 31, as global markets came under pressure following fresh U.S.-Iran tensions and a rebound in crude oil prices.

Asian markets traded lower, led by South Korean equities. The Kospi fell 3.5 per cent, while the Kosdaq declined 3.8 per cent. Japan’s Nikkei 225 dropped 2.16 per cent and the Topix slipped 0.95 per cent. Australia’s S&P/ASX 200 also edged down 0.27 per cent.

Gift Nifty was trading around 24,241, down nearly 71 points from the previous Nifty futures close, signalling a negative start for the Sensex and Nifty 50. On Friday, the Sensex gained 331 points, or 0.43 per cent, to close at 77,264.51, while the Nifty 50 advanced 85 points, or 0.35 per cent, to settle at 24,175.65, ending a two-session losing streak.

U.S. stock futures also declined. Dow Jones futures fell 85 points, or 0.16 per cent, while S&P 500 futures slipped 0.2 per cent. Nasdaq-100 futures also traded lower. Wall Street remained on track to end August with gains, with the Dow up around 2.1 per cent for the month, while the S&P 500 and Nasdaq Composite were higher by around 3 per cent and 4 per cent, respectively.

Geopolitical concerns intensified after U.S. forces targeted two Iranian rocket launchers on Larak Island in the Strait of Hormuz. Iran subsequently retaliated by striking two U.S. air bases in Jordan, according to Iranian media reports citing the Islamic Revolutionary Guard Corps.

The developments raised concerns over possible disruption to shipping through the Strait of Hormuz. The number of visible commodity vessels passing through the waterway fell to around five per day over the weekend, highlighting growing caution among shipping companies.

Crude oil prices rose more than USD 1 a barrel following the latest escalation. Brent crude futures gained 2.58 per cent to USD 90.58 a barrel, while WTI crude advanced 2.50 per cent to USD 86.18 a barrel. The rise came after both Brent and WTI declined more than 4 per cent last week.

Gold prices were largely steady after falling more than 3 per cent in the previous session. Spot gold was at USD 4,455.29 per ounce, while U.S. gold futures for December delivery declined 0.6 per cent to USD 4,504.90.

The precious metal remained under pressure after comments from U.S. Federal Reserve Chair Kevin Warsh indicated that further interest rate hikes may be required.

SAIL and LIC Housing Finance are under the F&O ban for Monday. Securities enter the F&O ban period when their open positions cross 95 per cent of the market-wide position limit.

Foreign portfolio investors remained net sellers in the Indian equity market on Friday, offloading shares worth Rs 5,039 crore. Domestic institutional investors, however, provided support by making net purchases worth Rs 5,184 crore.

The Indian rupee strengthened marginally by 2 paise to settle at 95.43 against the U.S. dollar on Friday. The currency tracked softer global crude oil prices and the positive trend in domestic equities.

Indian equities remain vulnerable to global risk-off sentiment, particularly with Asian markets falling sharply and crude oil prices moving higher. Investors will closely track developments around the Strait of Hormuz, crude oil prices, global bond yields and expectations around U.S. monetary policy.

The domestic market had extended its losing streak to three consecutive weeks last week, with sentiment affected by geopolitical uncertainty, crude oil movements and concerns over the U.S. monetary policy outlook. Strong gains in IT stocks following robust Nvidia earnings provided some support towards the end of the week, but weakness in several Large-Cap stocks continued to limit the broader recovery.

Disclaimer: The article is for informational purposes only and not investment advice.

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