TEAM FINANCE I THE GOAN
I ndian stock markets ended higher on Friday, but gave up most of their gains during the session and closed close to the day’s lows after the closing auction session (CAS).
The Sensex gained 363 points to finish at 76,515, while the Nifty 50 rose more than 24 points to close below 23,898. The broader market gave a mixed performance, with the Nifty Midcap 100 ending lower and the Nifty Smallcap 100 closing in positive territory.
1) Oil prices rise again
Crude oil prices rose around 8% this week after the US and Iran exchanged strikes following a month-long pause. The developments have renewed concerns about a possible supply shortage, with the Strait of Hormuz still closed to oil shipments.
Citi has raised its average Brent crude price forecast for the third quarter to $86 a barrel from $80, citing expectations of a longer-than-expected reopening of the Strait of Hormuz.
ANZ analysts have also raised their short-term Brent forecast to $95 a barrel. They warned that prices could rise further if the Middle East conflict worsens.
2) Bond yields add to pressure
A major sell-off in global bond markets is also adding to concerns among Indian investors. Bond yields in several major economies reached multi-year highs this week as markets faced pressure from higher oil-led inflation, tighter monetary policy and growing government borrowing.
Higher oil and fuel prices have increased inflation risks and borrowing costs for governments around the world. This has also raised concerns that economic growth could slow if conditions do not ease.
Rising US bond yields can make fixed-income investments more attractive because they offer higher returns with relatively lower risk. This could reduce the appeal of Indian equities, especially for foreign investors, and encourage some global funds to move towards US bonds.
3) Strong US jobs data
A stronger-than-expected US jobs report has again raised expectations of a possible interest-rate hike in September. The data could put pressure on Federal Reserve Chair Kevin Warsh as US President Donald Trump continues to call for lower borrowing costs.
US employers added 162,000 jobs in August, almost three times the number expected by economists. The labour force participation rate also increased to 61.6%, while the unemployment rate remained at 4.1%.
The stronger jobs data has increased the possibility of a rate hike at the Federal Reserve’s September 15-16 meeting. Warsh had said last week that the central bank needed greater confidence that inflation was moving towards its 2% target.
4) Foreign investors return
Foreign investors have stepped up their buying of Indian equities, with FPI inflows crossing $3.2 billion in August. The trend has continued into September, with FPIs investing Rs 2,374 crore in Indian equities during the first four days of the month.
According to V K Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, the easing of the chip trade and increased selling by FPIs in chip-related stocks in South Korea and Taiwan have helped redirect foreign money towards India.
India’s economic resilience is another positive factor. Q1 FY27 GDP growth stood at 7.8%, while first-quarter corporate earnings were better than expected and the rupee has shown signs of stabilisation.
The inflow of $127 billion through the FCNR (B) scheme has also helped strengthen the rupee. The currency has recovered from 96.96 to the dollar in May to 94.49 on September 4.
What lies ahead for Dalal Street
Technical indicators suggest that the Nifty has yet to show clear signs of a sustained recovery.
Sudeep Shah of SBI Securities said the index remains below both its short- and long-term moving averages. The 20-, 50- and 100-day exponential moving averages (EMAs) have also started moving lower, pointing to increasing bearish pressure.
The daily Relative Strength Index (RSI) is around 40 and remains below its nine-day average. The daily Average Directional Index (ADX) has moved above 20 and is rising, indicating that the current trend is gaining strength.
Key support and resistance levels
The immediate support zone for the Nifty is between 23,750 and 23,700. This area is significant because the 61.8% Fibonacci retracement of the earlier rise from 23,070 to 24,774 is located around this level.
A sustained fall below 23,700 could lead to further correction towards 23,500 and then 23,300.
On the upside, the Nifty faces resistance in the 24,150-24,200 range, where the 50-day and 100-day EMAs meet. A sustained move above this level could reduce the current bearish pressure and bring greater stability to the index.
