Pre-Open Points To Lower Open As Oil, Iran Weigh

Mumbai, September 8: Indian shares edged down at pre open signalling a lower start for benchmarks as oil remained elevated due to the ongoing tensions in the Middle East. 

Nifty 50 declined 0.12% and Sensex declined 0.16% at pre open. 

Sensex and Nifty 50 slid to six-week closing lows as IT stocks bore the brunt of the pressure. Rising tensions in the Middle East, coupled with growing expectations of a U.S. rate hike, further weakened investor appetite for risk.  

A potential increase in U.S. interest rates could weigh on emerging-market assets by making dollar-denominated investments and U.S. Treasuries more appealing, potentially curbing foreign capital flows into markets such as India.  

Despite the broader weakness, foreign investors returned to Indian equities, turning net buyers after three straight sessions of selling. Provisional exchange data showed foreign portfolio investors purchased shares worth Rs 280 crore on Monday.  

Temasek-backed logistics company Shiprocket reported a smaller first-quarter loss, helped by stronger performance in its core shipping operations.  

Neuland Laboratories, a pharmaceutical company, approved a Rs 126 crore capital expenditure plan to acquire 134 acres of land in Andhra Pradesh, supporting its expansion plans.  

Deepa Jeweller and Rays of Belief are set to make their stock-market debuts on Tuesday after completing their initial public offerings last week. 

Asia Mixed 

Japan’s Nikkei 225 edged 0.07% higher after moving between gains and losses, while South Korea’s KOSPI climbed 1.8%. Australia’s benchmark, however, fell 0.7% after a sharp deterioration in consumer sentiment. 

Investor caution was reinforced by the latest developments in the Middle East. Iran has threatened retaliation against U.S. attacks, including possible strikes on energy infrastructure in the Gulf, raising concerns over further disruptions to global oil supplies. 

S&P 500 futures were 0.07% lower in early Asian trade, pointing to a subdued reopening for U.S. equities. The three major U.S. benchmarks had ended lower on Friday after stronger-than-expected jobs data raised expectations of a Federal Reserve rate hike later this month. 

Oil Extends Rally 

Crude prices remained the key risk for markets, with Brent futures holding around $97 a barrel after rising for a third straight session and touching a six-week high on Monday. West Texas Intermediate crude was near $92.7 a barrel. 

The rally followed Iran’s warning that Gulf energy infrastructure could come under attack if the U.S. carries out further strikes. The Strait of Hormuz, a crucial route for global oil shipments, has consequently remained at the centre of investor concerns. 

For India, sustained oil prices at these levels pose a significant risk. The country imports around 85% of its crude requirements, making its economy and corporate earnings sensitive to prolonged increases in energy costs. Higher crude prices can widen the trade deficit, put pressure on the rupee and complicate the inflation outlook. 

Yen Strength, Fed Bets Add To Caution 

Currency markets also reflected shifting expectations on monetary policy. The yen strengthened as much as 0.6% to 153.51 per dollar, its strongest level since February 18, amid expectations that the Bank of Japan could move towards tighter monetary policy. 

The dollar index slipped to a two-week low, while markets are pricing around a 60% probability of a 25-basis-point U.S. rate hike at the Federal Reserve’s September 16 meeting. 

For emerging markets such as India, a combination of elevated oil prices and tighter U.S. rate expectations could keep foreign flows and the rupee under pressure. 

Source

•  Exchanges