Asian Markets Slide On AI Concerns, Wall Street Mixed; Indian Stocks Seen Opening Flat

Mumbai, July 28: Asian stocks fell sharply on Tuesday as a selloff in technology shares spread across the region, overshadowing improved risk appetite after the United States and Iran paused hostilities and oil prices extended their decline. 

The weakness in Asian equities came after Wall Street ended mixed overnight, while European shares also surrendered earlier gains as technology stocks came under pressure. The contrasting global signals suggest Indian equities could see a cautious or largely flat start on Tuesday, with lower crude oil prices offering some support. 

Indian benchmarks had snapped a five-session losing streak on Monday, with the Sensex rising 776.01 points, or 1.02%, to 76,835.78 and the Nifty 50 climbing 228.50 points, or 0.96%, to 23,995.95. The rally was aided by a sharp decline in crude oil prices and easing concerns over the Middle East conflict. 

Asia negative 

Asian markets provided a negative lead on Tuesday. A broad selloff in technology and chip stocks hit the region, with South Korea’s KOSPI plunging 9.6% as semiconductor stocks came under heavy pressure. The decline reflected growing investor concerns over the massive funding requirements associated with the artificial intelligence boom, raising questions about whether the huge capital spending on AI infrastructure will generate sufficient returns. Japan’s Nikkei slid 4.4%. Hong Kong’s Hang Seng declined 0.4%. 

The selloff also comes at a time when global investors are reassessing valuations in the technology sector after a powerful rally fuelled by optimism around artificial intelligence. Any sustained pressure on global chipmakers and technology stocks could therefore keep risk appetite in check. 

Wall Street ends mixed as investors await tech earnings 

Wall Street finished mixed on Monday, with investors turning their attention to a heavy slate of technology earnings for guidance. Concerns over elevated oil prices also clouded the outlook, with investors wary that persistent energy inflation could complicate the Federal Reserve’s interest-rate path. 

Results from Microsoft, Amazon, Meta Platforms and Apple are due this week. The results could determine whether the technology sector’s multi-year rally has further room to run or is beginning to lose momentum.  

The S&P 500 edged up 0.02%, the Nasdaq declined 0.18%, while the Dow Jones Industrial Average rose 0.51%. 

For Indian markets, the mixed US close offers little directional support, leaving domestic investors likely to take cues from Asian equities, crude prices and stock-specific earnings developments. 

European stocks lose momentum as technology shares weigh 

European equities also struggled to sustain their initial rally on Monday. The pan-European STOXX 600 index ended little changed after earlier climbing nearly 1%, as losses in technology stocks, led by chip equipment maker ASML, offset optimism surrounding easing US-Iran tensions and a sharp decline in oil prices. 

The European market’s inability to hold early gains highlights the competing forces currently shaping global sentiment: hopes of an easing geopolitical crisis and lower energy costs on one side, and concerns over stretched technology valuations and AI-related spending on the other. 

Oil prices extend decline, offering relief to Indian equities 

Crude oil remained a key positive factor for Indian markets. Oil prices fell 1.7% on Tuesday as investors assessed the possibility of a diplomatic resolution to the US-Iran conflict and the eventual normalisation of energy flows from the Middle East. Brent crude fell to around $87 a barrel, while US West Texas Intermediate was around $81. 

The decline in oil prices is particularly supportive for India, one of the world’s largest oil importers, as cheaper crude can ease pressure on the country’s import bill, inflation and corporate input costs. It could also support the rupee and improve sentiment towards oil-sensitive sectors. 

Overall, Indian equities are likely to open flat to mildly cautious on Tuesday, with lower crude prices providing a cushion against the weak Asian market cues. Investors may remain selective, while sectors sensitive to energy prices could find support. 

After Monday’s sharp rebound, the market’s ability to sustain gains may depend on whether the decline in oil prices continues. With the US Federal Reserve’s policy decision also approaching, investors are likely to remain cautious and closely track global cues through the session. 

Source

•  Exchanges