India equities set for muted open as Iran tensions offset cooling US inflation
Indian stocks are poised for a flat opening on Wednesday as a broader Asian rally driven by cooling US inflation is counterbalanced by surging crude prices triggered by escalating US-Iran military conflict.
Indian benchmark indices are expected to open flat on Wednesday, diverging from a broader Asian market rally. Gift Nifty was trading around the 24,049 level, indicating a mildly positive start with a premium of nearly 25 points over the previous close.
The subdued local outlook follows a 0.66% drop in the Nifty 50 to 24,052.05 and a 0.72% decline in the Sensex to 77,054.94 on Tuesday. Elevated crude oil prices are heavily weighing on domestic sentiment.
Brent crude rose 1.72% to $86.19 a barrel and WTI crude gained 1.4% to $80.40 after US President Donald Trump reimposed a naval blockade on all Iranian ports. Trump threatened to hit power plants and bridges next week unless Tehran resumes negotiations, while the US military conducted strikes on Iran for a fourth consecutive day. Iran responded by closing the Strait of Hormuz.
For India, a major oil importer, Brent prices remaining above $85 per barrel pose a direct risk to corporate margins and domestic inflation. Gold prices steadied at $4,054.36 an ounce, reflecting persistent safe-haven demand.
The broader regional rally was powered by cooler-than-expected US inflation data. US consumer prices rose 3.5% year-over-year in June, down from 4.2% in May and below the 3.8% forecast. On a monthly basis, the Consumer Price Index fell 0.4%.
Wall Street closed higher on the inflation print and strong bank earnings. The Nasdaq Composite led gains, rising 0.9% to 26,107.01, while the S&P 500 added 0.38% to 7,543.89. Semiconductor stocks surged, with SK Hynix ADR skyrocketing 27.29%, Micron Technology jumping 4.92% and Nvidia gaining 4.06%.
The risk-on mood carried into Asia, with South Korea’s Kospi jumping 5.51% and Japan’s Nikkei 225 rising 0.30%. However, the US tech sector saw a major casualty in after-hours trading. IBM shares crashed 25.21% after the company warned it had "faltered" in keeping pace with a shift in corporate spending from software to data-center infrastructure. IBM expects second-quarter revenue to rise just 1% to $17.2 billion, missing analysts’ estimates of $17.86 billion.
“Indian equities are expected to trade sideways with some volatility expected in the near term amid escalating geopolitical tensions in West Asia, Brent crude prices remaining above $85 per barrel and weak global cues. With the Q1 results season gathering pace, stock-specific action is likely to dominate, while investors will closely monitor key global macro data,” said Siddhartha Khemka, Head of Research, Wealth Management, at Motilal Oswal Financial Services Ltd.
