Indian Stock Market: Key Changes and Insights After the Weekend

The Indian stock market, specifically the domestic equity indices like the Sensex and Nifty 50, is anticipated to open higher on Monday following positive global market trends and a sharp slump observed last week. Below, we explore the significant changes affecting the market over the weekend.

Global Market Influences

Asian markets exhibited mixed performances, while the US stock market closed with robust gains on Friday, driven by an encouraging jobs report. Market sentiment shifted dramatically, now favoring a 25 basis points cut by the US Federal Reserve in November, rather than the previously expected 50 basis points. According to Reuters, traders currently assign a 95% probability to this quarter-point cut, an increase from 65% mid-last week, and only a 5% chance of no cut at all, as per the CME’s FedWatch tool.

Indian Market Performance

On Friday, the Indian stock market indices finished nearly 1% lower, marking the fifth consecutive session of losses. The Sensex plummeted by 808.65 points (0.98%), closing at 81,688.45, while the Nifty 50 dropped by 235.50 points (0.93%) to settle at 25,014.60.

Cautious Outlook

Market analysts expect a period of consolidation this week, tempered by concerns over escalating tensions in West Asia. With the earnings season commencing, stock-specific actions are likely to continue. The upcoming Reserve Bank of India (RBI) policy meeting will also be a focal point for investors. While a rate cut is unlikely, commentary from the meeting will hold considerable weight. According to Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, key market triggers this week include the RBI’s Monetary Policy Committee (MPC) meeting, initial Q2 results, developments in the Israel-Iran conflict, foreign fund flows, and trends in crude oil prices.

Asian Markets Update

Asian markets showed a mixed trend on Monday, primarily driven by Japanese stocks. Japan’s Nikkei 225 index gained 2.03%, while the Topix index increased by 1.62%. In contrast, South Korea’s Kospi fell by 0.28%, even as the Kosdaq saw a modest rise of 0.37%. Futures for the Hong Kong Hang Seng index pointed to a lower opening.

Gift Nifty Performance

The Gift Nifty was trading around the 25,260 level, reflecting a premium of nearly 70 points compared to the previous close of Nifty futures, suggesting a positive opening for Indian stock market indices.

Wall Street Trends

The US stock market enjoyed a strong finish on Friday, with the Dow Jones Industrial Average reaching a record closing high. The Dow rose by 341.16 points (0.81%) to close at 42,352.75, while the S&P 500 climbed 51.13 points (0.90%) to 5,751.07. The Nasdaq Composite also had a significant gain, closing 219.37 points (1.22%) higher at 18,137.85. Notably, shares of Spirit Airlines plummeted by 24.6%, while Frontier Group’s stock surged by 16.4%. United Airlines shares rose by 6.5%, and Delta Air Lines saw a 3.8% increase, while Rivian’s shares fell by 3.2%.

US Nonfarm Payrolls Report

The US job market showed signs of strength in September, with nonfarm payrolls increasing by 254,000 jobs, exceeding economists’ expectations of a 140,000 increase. The unemployment rate also fell to 4.1%, down from 4.2% in August, thanks to an uptick of 430,000 jobs in household employment.

Geopolitical Tensions: Israel-Iran Conflict

Tensions in West Asia have escalated, with Israel intensifying its airstrikes on northern Gaza and southern Lebanon. Reports indicate that a strike on a mosque killed at least 19 people. The situation in the region continues to be a significant concern for investors.

Oil Prices Trends

Crude oil prices have retreated after experiencing their largest weekly rise in over a year. Brent crude futures dipped by 0.5% to $77.62 per barrel, while US West Texas Intermediate futures also fell by 0.5%, settling at $74.03 per barrel.

Currency Movements

Following the robust US jobs data, the US dollar extended its rally, with the dollar index remaining flat but recording a rise of 0.5% on Friday, reaching a seven-week high. The yen experienced a slight decline, hitting 149.10, marking its lowest level since August 16. The euro fell by 0.06% to $1.0970, while the British pound remained stable around $1.3122.

Gold Price Fluctuations

Gold prices faced downward pressure due to the stronger US dollar and increased expectations for a smaller rate cut from the Federal Reserve. Spot gold prices decreased by 0.1% to $2,650.79 per ounce, while US gold futures rose by 0.1% to $2,670.20.

FII and DII Activity

On Friday, foreign institutional investors (FIIs) net sold Indian shares worth ₹9,896.95 crore, while domestic institutional investors (DIIs) made net purchases totaling ₹8,905.08 crore, as per provisional data available on the exchanges.

Conclusion

As the Indian stock market navigates the aftermath of a challenging week, key global influences and domestic developments will shape investor sentiment moving forward. Traders will be closely monitoring the earnings season, geopolitical tensions, and central bank policies for insights into future market trends. The mixed performances in global markets and rising economic indicators will continue to play a crucial role in determining the direction of the Indian equity market.