Markets Set to Open Muted on Wednesday; Gift Nifty Down 0.17% as Iran Ceasefire Violation Rattles Sentiment

Mumbai, May 27: Domestic equity markets are poised to open on a cautious-to-negative note on Wednesday as fresh geopolitical turbulence from the US-Iran conflict and a sharp rebound in crude oil prices overnight weighed on investor sentiment, reversing the optimism that had driven the previous week’s sharp rallies and leaving markets in a fragile state heading into the session.

Gift Nifty futures were trading at 23,872.50, down 40.50 points or 0.17%, as of 07:34 IST on May 27, pointing to a muted-to-negative opening for the Sensex and Nifty 50 when domestic markets resume after Tuesday’s expiry-day selloff that had already sent the Nifty below the 24,000 mark.

Iran War

The Iran war deteriorated sharply on Tuesday as the United States conducted fresh strikes in southern Iran’s Hormozgan praovince targeting missile sites and boats attempting to lay mines prompting Tehran’s foreign ministry to declare the attacks a “gross violation” of the tenuous ceasefire that had been in place for nearly seven weeks. US Secretary of State Marco Rubio acknowledged that a deal could take “a few days,” offering little near-term comfort to markets that had been pricing in an imminent peace agreement.

Deal Structure

On the deal structure front, both sides had previously indicated progress on an initial framework that would end hostilities on all fronts, allow shipping through the Strait of Hormuz to resume over a 30-day mine-clearance window, and provide some financial relief to Iran with a second phase to tackle more complex issues including Iran’s nuclear programme over 60 days. Iran’s negotiators have been pushing for the memorandum to include the release of billions of dollars of frozen assets, while Israel separately pounded Lebanon with more than 120 air strikes on Tuesday in one of the heaviest days of bombing in weeks, with Iran having sought an end to Israeli attacks as part of any deal.

Asian & US Markets

Asian markets were mixed on Wednesday morning, with Japan’s Nikkei 225 leading the gainers with a 0.92% advance to 65,593.56 and Australia’s ASX All Ordinaries edging up 0.11% to 8,892.10. Indonesia’s JSX Composite was the biggest decliner, falling 1.23% to 6,130.19, while Malaysia’s KLCI slipped 0.55% to 1,699.02 and Hong Kong’s Hang Seng edged marginally lower by 0.02% to 25,594.97.

US markets closed on a positive note on Tuesday, with the Nasdaq Composite surging 1.19% to 26,656.18 and the S&P 500 gaining 0.61% to 7,519.12, while the Dow Jones Industrial Average bucked the trend with a 0.23% decline to 50,461.68.

Oil Prices

Crude oil prices rebounded sharply on Tuesday after the fresh US strikes in Iran dashed hopes of an imminent Strait of Hormuz reopening, with global benchmark Brent rising 3.6% or $3.44 to settle at $99.58 a barrel. WTI crude fell $2.71 or 2.8% to settle at $93.89, catching up to Monday’s selloff when US markets were closed for Memorial Day. On Monday, Brent had closed at its lowest since April 20, losing 7% on renewed peace deal optimism making Tuesday’s reversal one of the sharpest single-session crude swings in recent weeks.

Tuesday Session

Indian benchmark indices ended Tuesday’s expiry-day session sharply lower, with the Sensex falling 479.26 points or 0.63% to close at 76,009.70 and the Nifty 50 declining 118 points or 0.49% to settle at 23,913.70 — slipping below the psychologically important 24,000 mark. The selloff was driven by a combination of rising crude oil prices, renewed geopolitical tensions in West Asia, and weakness in banking and IT stocks, with investors unwinding positions on the monthly derivatives expiry day. The crude oil rebound remained the central concern for Indian equities given its potential impact on inflation, fiscal balances and the rupee, with Wednesday’s session likely to remain volatile until there is greater clarity on the Iran diplomatic track.

Source:

• nseindia.com