Indian equities set to drop on Hormuz tensions despite softer oil
Indian benchmark indices are poised to extend losses as military escalations in the Strait of Hormuz rattle sentiment, though domestic infrastructure growth provides a floor.
Indian equities are positioned for a weaker open on Tuesday after the previous session's losses and negative offshore cues. Gift Nifty futures traded around 24,154, reflecting a roughly 105-point discount to the prior close and signaling a negative start for the Nifty 50. The overnight decline follows a Monday session where the Sensex fell 442.93 points, or 0.57%, to 77,708.52, and the Nifty 50 dropped 95.80 points, or 0.39%, to 24,238.50.
The primary headwind is an acute escalation in US-Iran hostilities. Iran’s Revolutionary Guards reported that two oil tankers caught fire following explosions in the southern Strait of Hormuz. The Guards stated the critical shipping chokepoint will remain closed as long as US regional actions persist and claimed to have targeted US military radar and air defense systems in Bahrain's Muharraq area.
Despite the threat to a crucial oil transit route, crude prices softened amid reports of mediation efforts. Brent crude fell 0.37% to $88.89 a barrel, while US West Texas Intermediate held steady at $82.47. Gold remained flat at $4,008.83 an ounce, and silver slipped 0.2% to $56.31.
Domestic economic data offers a counterweight to the geopolitical noise. Production in India's nine core infrastructure sectors accelerated to a five-month high of 5% in June. This domestic resilience is reflected in the broader market, even as benchmarks falter.
Ajit Mishra, SVP of Research at Religare Broking Ltd, noted this dynamic. “Despite the choppiness in the benchmark index, rotational buying across sectors and the resilience of the broader markets continue to offer ample stock-specific trading opportunities. We therefore recommend maintaining a cautious ‘buy-on-dips’ approach, focusing on relatively stronger stocks while adhering to disciplined risk and position management,” he said.
Broader global markets offered little directional clarity. Wall Street closed lower ahead of major tech earnings, with the Dow Jones Industrial Average declining 0.59% to 51,839.26. Anticipation of those results drove a split among mega-cap tech names, lifting Microsoft 2.15% but pulling Apple and Tesla down more than 2%.
Asian markets traded mixed in early Tuesday dealing, with Japan’s Nikkei 225 rising 1.03% while Hong Kong indicated a weaker open. The US dollar index held firm at 100.96, hovering near a one-week high.
