Asian Markets Decline, Softer Oil May Cushion Indian Equities at Open

Mumbai, July 2: Indian benchmark indices are likely to witness a cautious-to-flat start on Thursday, tracking decline among Asian peers after a subdued session on Wall Street and a pause in European markets. However, a sharp decline in crude oil prices following progress in U.S.-Iran talks could provide a supportive backdrop for domestic equities, particularly sectors sensitive to fuel costs. 

Investors will also remain focused on the upcoming U.S. payrolls data, which could shape expectations around the Federal Reserve’s interest rate trajectory and influence global risk appetite.

Asian equities trade mixed 

Asian markets traded lower as investors turned cautious after the strong gains seen in global equities over the past few weeks. Market participants booked profits in technology stocks while awaiting key U.S. economic data for fresh direction.

Japan’s Nikkei 225 declined 1.2% and South Korea’s Kospi fell 3.6%, with semiconductor stocks leading declines amid concerns over lofty valuations. The broader MSCI Asia-Pacific index outside Japan edged 0.16% lower, reflecting a risk-off mood across the region. 

The cautious sentiment came despite easing geopolitical tensions in the Middle East, as investors preferred to stay on the sidelines ahead of the U.S. employment report that could offer clues on the timing of future Fed rate cuts. 

Wall Street ends mixed

U.S. equities finished Wednesday’s session slightly lower after a choppy trading day, with investors balancing easing geopolitical concerns against uncertainty over monetary policy. The S&P 500 and Nasdaq were dragged most by chipmakers. To be sure, Meta Platforms surged after news that the company is making a cloud business to sell additional AI compute. 

Wall Street also entered the second half of the year on a cautious footing as traders assessed the implications of developments in the Middle East and awaited fresh macroeconomic data. 

European rally takes a breather 

European shares paused after a recent rally, as investors booked profits and reassessed geopolitical developments.

The pan-European STOXX 600 index ended 0.4% lower, with sentiment weighed by lingering uncertainty over the durability of the emerging U.S.-Iran peace efforts. While hopes of reduced tensions supported energy markets, investors remained cautious about the broader global growth outlook. 

Oil extends decline after U.S.-Iran talks 

Crude oil prices fell for a second straight session after indirect talks between the United States and Iran in Doha concluded with signs of progress, easing fears of supply disruptions through the Strait of Hormuz. 

Brent crude traded near $71 a barrel, while U.S. West Texas Intermediate (WTI) slipped below $68. Expectations of higher OPEC+ production in the coming months also added to the downward pressure on prices. 

Lower crude prices are generally supportive for India, the world’s third-largest oil importer, as they help reduce imported inflation, narrow the current account deficit and improve margins for fuel-intensive sectors such as aviation, paints, tyres and oil marketing companies. 

What it means for Indian markets 

While the decline across Asian markets and subdued global risk sentiment could keep Indian equities under pressure in early trade, the continued decline in crude oil prices may help limit losses. 

Investors are also likely to keep an eye on foreign institutional investor flows, global bond yields and upcoming U.S. economic data for further cues. 

Source: Exchanges