Indian equities face cautious open amid inflation data and oil risks
Indian markets are poised for a muted start as rising domestic inflation and geopolitical oil risks offset recent institutional buying and a weaker US dollar.
GIFT Nifty traded 40 points lower at 24,391, signaling a negative opening for Indian equities on Monday. The benchmark index faces immediate headwinds despite Friday's combined net purchases of 508.12 crore rupees by foreign portfolio investors and 356.40 crore rupees by domestic funds.
The domestic macroeconomic backdrop presents clear challenges for corporate margins and consumer spending. The rupee declined 0.25 percent to 95.44 last week, pressured by India's consumer price index accelerating to 4.45 percent in July from 4.37 percent the prior month. Elevated crude prices during the same period have further added to inflationary concerns for the central bank.
Energy costs remain a critical concern for the import-heavy economy. Crude oil prices held steady in early trade as tanker traffic through the Strait of Hormuz slowed, keeping inflation risks tilted to the upside amid stalled peace negotiations between the United States and Iran.
Global markets offer mixed signals to offshore investors tracking the Federal Reserve's policy outlook. The US dollar weakened against all Group-of-10 currencies after July retail sales posted their steepest drop in over a year. Concurrently, US equity futures edged higher following a Friday slip driven by signs of slowing consumer spending, while gold advanced as traders scaled back expectations for a US interest rate hike next month.
Market volatility remains subdued, with the India VIX dropping 1.58 percent to settle at 11.67. However, technical indicators suggest fading momentum for the Nifty index. The relative strength index is weakening with a bearish crossover slipping toward the oversold zone, according to Rupak De, a senior technical analyst at LKP Securities.
Trading restrictions will apply to four securities entering the derivatives ban period on Monday. BANDHANBNK, LICI, MANAPPURAM, and SAIL have all crossed the 95 percent market-wide position limit in the futures and options segment.
