Asian Rout, Oil Surge Point to Weak Start For D-street

Mumbai, June 8: Indian benchmark indices are set for a sharply negative start on Monday as a plunge in Asian equities, a steep selloff on Wall Street and a spike in crude oil prices dent investor sentiment globally. 

Global cues turned decisively risk-off after investors dumped technology stocks. Global factors are likely to dominate sentiment at the start of the Indian markets despite stronger-than-expected Indian GDP data released after market hours on Friday. 

Asian markets hammered as tech stocks tumble 

Asian equities witnessed a broad-based selloff on Monday, extending the weakness seen in U.S. markets late last week. The downturn was led by technology and semiconductor stocks, which have been at the forefront of the global equity rally over the past year. 

South Korea’s KOSPI plunged 4% while Japan’s Nikkei 225 dropped 3.8%. The broader MSCI Asia-Pacific index outside Japan fell 2.4%, reflecting heavy selling across regional markets as investors reassessed valuations in the technology sector. 

The sharp decline followed Friday’s rout on Wall Street, where concerns about higher-for-longer US interest rates and stretched valuations in artificial intelligence-linked stocks sparked aggressive profit-taking. 

Wall Street records sharp fall 

US equities ended sharply lower on Friday, with technology stocks bearing the brunt of the selloff. The Nasdaq Composite slumped more than 4%, marking its steepest one-day decline in over a year, while the S&P 500 and Dow Jones Industrial Average also posted significant losses. 

The trigger was a stronger-than-expected US jobs report, which reinforced expectations that the Federal Reserve may keep monetary policy restrictive for longer. Investors subsequently pared expectations of near-term rate cuts, leading to a sharp repricing across equity markets. 

The selloff was particularly severe in semiconductor stocks, a segment that has been a key driver of global market gains over the past year. 

Crude oil surge adds to concerns 

Adding to the pressure, crude oil prices climbed more than 3% after escalating tensions in the Middle East raised fears of potential supply disruptions. 

For India, higher oil prices present a dual challenge. A sustained rise in crude can fuel inflationary pressures and widen the country’s import bill, while also hurting profit margins in fuel-sensitive sectors such as aviation, paints, logistics and consumer goods. 

Investors are therefore likely to closely track developments in the Middle East alongside movements in crude prices during the trading session. 

Global cues outweigh domestic positives 

While India’s economy expanded at a stronger-than-expected pace in the March quarter, providing evidence of resilient domestic growth, the positive macroeconomic backdrop may struggle to offset the weight of adverse global developments in the near term. 

With Asian markets in free fall, Wall Street weakness and crude oil prices moving higher, the external environment suggests that the Sensex and Nifty could begin the week under pressure. Market participants are expected to remain cautious until volatility in global equities and commodity markets shows signs of easing. 

Source: Exchanges