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Informist, Thursday, Oct. 3, 2024

By Alina Geogy

MUMBAI – The benchmark indices are expected to extend losses Friday on fears that the conflict between Israel and Iran may turn into a wider regional war. Analysts recommended investors to remain cautious amid geopolitical developments in West Asia, which led to a surge in crude oil prices. The US non-farm payrolls data for September is due on Friday.

The uncertainty around geopolitical developments in West Asia is "getting discounted", but future events will be monitored for more cues, Onkar Kelji, research analyst at IndSec Securities, said. Any signs of an escalation in the region could trigger a further sell-off in the domestic market in the upcoming sessions.

The movement in crude oil prices will also be tracked, which weighed on shares of domestic oil marketing companies Thursday. Crude oil is a major raw material for oil refiners and the surge in the commodity's price had hit their refining margins and profits in the previous quarters. Shares of Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp closed 4-7% lower due to the surge in crude oil prices.

The weakness in the market is likely to continue as long as the Nifty 50 remains below 25365 points, Shrikant Chouhan, head of equity research at Kotak Securities, said in a note. On the downside, the index may fall to 25150-25025 points. If the index rises above 25365 points, it could bounce back to 25475-25500 points, Chouhan said. On Thursday, the Nifty 50 and the Sensex ended at 25250.10 points and 82497.10 points, respectively, down 2.1% each.

Investor sentiment may also be dampened over the outflow of investments from overseas investors. On Thursday, foreign institutional investors net sold shares worth INR 152.43 billion, as per provisional data. On the other hand, domestic institutional investors net purchased shares worth INR 129.14 bln.

There were also reports that overseas investors could be shifting money from the domestic equity market to China after the latter announced stimulus measures last week to boost its economy. These measures include more fiscal spending and steps to stabilise its ailing property sector.

Back home, defensive stocks, such as pharmaceuticals and fast-moving consumer goods, are set to outperform in the coming sessions as investors will seek safer options in the event of a correction, particularly since the market seems "unstable", Vanitha Poojari, equity research analyst at Maximus Securities, said. 

Along with the global developments, the equity market awaits a series of events in the short term, including the September quarter earnings and the outcome of the RBI's Monetary Policy Committee's meeting.  End

Edited by Vidhi Verma

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