Markets Set to Open in the Green as US-China Find Common Ground on Hormuz

Mumbai, May 13: Indian equity markets are poised to open on a positive note on Wednesday, snapping a bruising four-session losing streak, after a significant diplomatic development offered markets their first ray of geopolitical hope in days the United States and China have agreed that no country can be allowed to exact shipping tolls in the Strait of Hormuz, signalling rare common ground between the world’s two largest economies on the Iran war’s most disruptive dimension. This comes ahead of a high-stakes summit between US President Donald Trump and Chinese President Xi Jinping later this week.

Gift Nifty

Gift Nifty futures were trading at 23,435.50 as of 8:07 am IST on May 13, up 35.00 points or 0.15%, pointing to a gap-up opening for domestic benchmarks after two consecutive sessions of steep losses.

Asian and US markets

Asian stocks were mixed on Wednesday after big rallies in Tokyo and Seoul. Japan’s Nikkei 225 Index gained 0.30% to 62,930.20 while Hong Kong’s Hang Seng Index dipped 0.39% to 26,245.77 Indonesia’s JSX Composite slumped 0.68% to 6,858.90 while Pakistan’s KSE 100 fell 0.93% to 168,916.22 which is the biggest loser among Asian markets so far, signalling that geopolitical relief is being priced into Asia markets unevenly.

US stocks ended mixed on Tuesday with Dow Jones Industrial Average advancing 0.11% to 49,760.56 while NYSE Composite closed higher by 0.19% at 23,015.34 whereas Nasdaq Composite shed 0.71% to 26,088.20 and S&P 500 slipped 0.16% to close at 7,400.96 as investors rotated into blue-chip industrials while tech stocks continued to face selling pressure.

Oil Prices

Oil prices extended losses on Wednesday for the first time in four sessions as traders took profits ahead of possible developments over the fragile ceasefire in Iran and upcoming Trump-Xi summit. Brent crude futures declined by 82 cents or 0.76% to trade at $106.95 a barrel while US West Texas Intermediate crude was down by 66 cents or 0.65% at $101.52 per barrel. The decline in crude prices comes as a sigh of relief for India from rising import bills although both benchmarks are trading well above the psychological $100-level that analysts have suggested could trigger lasting macro pain for India.

Retail Inflation

Retail inflation in India inched up to 3.48% year-on-year in April from 3.40% in March on account of higher prices of food articles but is still below RBI’s tolerance limit of 4% although elevated crude oil prices in the wake of Iran tensions could derail near-term inflation expectations. India’s April food inflation quickened to 4.2% from 3.87% in March but analysts are also expecting a subpar monsoon this year, adding to overall price pressures.

Banks to Resume Gold and Silver Imports

India’s banks will restart gold and silver imports as they decided to accept a customs duty of 3% on precious metals which earlier forced banks to completely stop shipments due to losing margin on imported bullion, reported PTI citing trade and government sources. Gold imports are likely to rise which will further widen India’s trade deficit and could weigh on rupee further which has been the worst-performing currency in Asia this year so far. Prime Minister Modi had urged people not to buy gold jewellery for at least a year during his speech on Sunday as the country tries to conserve its foreign exchange reserves.

Tuesday Closing

Indian markets tumbled over 1% on Tuesday with Sensex dropping 1,456.04 points or 1.93% to close at 74,559.24 while Nifty finished down 436.30 points or 1.87% at 23,379.55 as investors turned cautious on rising crude oil prices that brushed a 4-year high intraday while investors are also awaiting Trump’s speech later today. Investors also took cue from Prime Minister Narendra Modi’s speech where he urged citizens to exercise austerity and refrain from purchasing gold for at least a year which triggered a sell-off in bullion counters. Bank stocks witnessed major selling pressure as reports emerged that Indian banks decided to resume gold imports after clearing-up differences over duties with the government while over 47 out of the 50 Nifty stocks closed with losses.

Source:

• nseindia.com