TEAM FINANCE
Indian equity markets ended lower, with the recently introduced closing auction session continuing to cause a gap between the Sensex and Nifty.
The Sensex declined 456 points, or 0.58%, to close at 78,499, while the Nifty 50 slipped 65 points, or 0.27%, to finish at 24,571. The broader market remained mixed. The Nifty Smallcap 100 ended lower, while the Nifty Midcap 100 rose 0.2%.
Investors will track five key factors that could influence market sentiment from Monday.
1. Crude oil prices
Oil prices recovered on Thursday and Friday after falling during the first three sessions of the week. The rise came amid uncertainty over negotiations concerning control of the Strait of Hormuz and efforts to reopen the important shipping route.
The outlook for crude will depend largely on how long supply disruptions continue. JPMorgan estimates that every additional month of disruption could add around $7-$8 a barrel to Brent crude prices. If the disruption lasts three months, average monthly Brent prices could reach about $114 a barrel.
Goldman Sachs has warned that Brent could rise to $120 a barrel if shipping through the Strait of Hormuz, a major global oil route, remains disrupted.
2. June quarter earnings
The earnings season is expected to become busier next week, with around 2,045 companies scheduled to announce their June quarter results between Monday and Friday.
Investors will closely watch major companies such as Tata Motors, Hindustan Aeronautics (HAL) and Vodafone Idea.
Goldman Sachs expects the Nifty 50 to recover towards 26,500, which would be above its previous record high of 26,373. The global investment bank has turned more positive on India after recent improvements in the broader economic outlook.
It expects investors to increasingly focus on reasonably valued stocks as expectations of an economic recovery strengthen. Large-cap companies and banks could benefit the most if foreign investor selling reverses in the second half of the year.
3. US employment data
US employment figures came in weaker than expected in July, reducing expectations of a possible interest rate hike by the US Federal Reserve in September.
Non-farm payrolls fell by 23,000 jobs in July after June’s figure was revised down to an increase of 20,000. Economists surveyed by Reuters had expected an increase of 80,000 jobs.
The weak employment numbers have led experts to believe that the Federal Reserve may be less likely to raise interest rates at its next meeting.
4. FII and DII flows
Foreign Institutional Investors (FIIs) remained net buyers for the second straight week. Provisional exchange data showed net purchases of Rs 2,911 crore during the current week, compared with Rs 5,949 crore in the previous week.
Domestic Institutional Investors (DIIs) also continued to buy Indian equities. They recorded net purchases of Rs 7,768 crore, with buying seen during four of the five trading sessions.
Market watchers said easing geopolitical tensions helped improve investor confidence and supported buying by both FIIs and DIIs.
5. Global market signals
US stocks could face another important test next week, as fresh inflation data may influence expectations about the Federal Reserve’s future interest rate decisions.
The S&P 500 reached a record closing high this week, helped by a recovery in technology and semiconductor stocks. Over four sessions ending Tuesday, the index gained 5.75%, marking its strongest four-day performance since April.
Lower oil prices and easing tensions in the Middle East also supported markets by reducing some inflation concerns. US stocks gained further on Friday after weak jobs data lowered expectations of an immediate rate hike.
The latest rally has pushed the S&P 500’s gain for the year above 13%. Better-than-expected corporate earnings for a second consecutive quarter have also strengthened investor confidence.
In Asia, South Korea’s KOSPI was among the weakest performers in July. Samsung Electronics and SK Hynix accounted for a large share of the index’s decline in market value.
Concerns about the sustainability of AI-related spending and growing competition from Chinese companies weighed on chip stocks. Heavy trading in leveraged exchange-traded funds linked to semiconductor companies also increased market volatility.
Technical outlook
SBI Securities’ Sudeep Shah said the Nifty could face immediate resistance in the 24,700-24,750 range.
A strong move above 24,750 could open the way towards 25,000 and then 25,200 in the short term.
On the downside, the 200-day Exponential Moving Average (EMA) zone between 24,400 and 24,350 is expected to offer strong support.
The index is at an important technical level, and the next major move could depend on whether it breaks above resistance or falls below support.
