Pre-Open Points To Flat Start As Oil, Global Weakness Counter GDP Data

Mumbai, September 1: Indian shares flatlined at pre open signalling a subdued start for benchmarks as stronger-than-expected GDP data got countered by elevated oil and weakness across global stocks amid rising Middle East tensions. 

Nifty 50 declined 0.01% and Sensex edged up 0.05% at pre open.  

India’s economic growth accelerated to 7.8% in the April-June quarter, beating market expectations as robust investment activity and a strong manufacturing sector added further momentum to domestic consumption. 

The stronger-than-expected expansion came against a backdrop of heightened geopolitical uncertainty, with the U.S.-Israeli conflict with Iran continuing to unsettle global financial markets.  

The Nifty 50 ended August 1.2% lower as persistent Middle East tensions kept investors cautious, with index heavyweights HDFC Bank and Reliance Industries weighing on the benchmark. 

Tuesday’s session will be closely watched for volatility linked to the weekly expiry of Nifty 50 derivatives. The recently introduced closing auction mechanism for stocks with derivative contracts has contributed to sharper moves in both the cash and options segments on expiry days. 

The mechanism saw greater participation on Monday amid MSCI index changes that triggered passive fund flows across several stocks. Despite the broader impact, volatility remained largely stock-specific. 

Foreign portfolio investors were sellers, offloading Indian equities worth Rs 7,986 crore on Monday, according to provisional exchange data.  

In corporate developments, ITC said its technology arm ITC Infotech will acquire a 22.1% stake in Happiest Minds Technologies for about Rs 1,330 crore in cash. ITC Infotech is also expected to be listed on stock exchanges following the transaction.  

ONGC plans to step up exploration of its domestic deepwater and ultra-deepwater assets, with Chairman A.K. Singh outlining a Rs 1 lakh crore investment over the next five years. 

Milky Mist Dairy Food, a recently listed dairy company, reported a sharp increase in April-June profit to Rs 64.68 crore, while revenue grew 43.6% year-on-year, reflecting strong growth in the quarter. 

Asian Markets Mixed 

Asian equities were largely lower on Tuesday as investors reacted to renewed U.S.-Iran military strikes and their potential impact on energy supplies and inflation. 

The MSCI Asia Pacific index was up 0.14%, while Japan’s Nikkei 225 fell 0.4% and South Korea’s Kospi declined 0.7%. 

The escalation has raised concerns about potential disruption to oil supplies, particularly through the Strait of Hormuz, a critical route for global energy shipments. 

Higher energy prices could add to inflationary pressures and complicate expectations for monetary policy easing across major economies. The development is particularly significant for emerging markets that rely heavily on imported energy. 

Wall Street Ends Lower 

U.S. stocks ended lower on Monday as renewed tensions in the Middle East pushed oil prices higher and raised concerns that persistent inflation could limit the scope for monetary policy easing. 

The Dow Jones Industrial Average fell 0.70%, while the S&P 500 declined 0.33%. The Nasdaq Composite slipped 0.12%. 

Despite the losses, all three major U.S. benchmarks ended August with gains. 

Energy stocks bucked the broader weakness as crude prices climbed. Halliburton and Valero Energy rose 1.9% each. 

U.S. stock futures were mixed early Tuesday, with Dow futures little changed, as investors continued to assess the potential economic fallout from the Middle East conflict. 

Oil Tops $90 

Oil prices remained the biggest global market trigger, with Brent crude rising 0.8% to $91.2 a barrel and U.S. West Texas Intermediate crude gaining 1.1% to $86.7. 

The renewed fighting between the U.S. and Iran has increased concerns about further supply disruptions, particularly if the conflict affects shipping through the Strait of Hormuz. 

For India, sustained higher crude prices could widen the import bill, increase inflationary pressures and weigh on the rupee. 

The impact is likely to be felt across sectors, with airlines, paints, chemicals and other fuel-intensive industries facing margin pressure, while upstream oil producers could benefit from higher crude prices. 

Bond Yields, Fed Rate Outlook In Focus 

Higher oil prices are adding to concerns around the global interest-rate outlook as investors reassess the Federal Reserve’s next policy moves. 

The benchmark 10-year U.S. Treasury yield rose to 4.758%, keeping financial conditions relatively tight for emerging markets. 

Investors are also looking ahead to the U.S. jobs report later this week for clues on the Fed’s policy path. A stronger-than-expected labour market could reinforce expectations for interest rates to remain elevated, while signs of cooling could support the case for monetary easing. 

Source

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