Indian equities face sixth straight drop as oil hits $100
Indian equities are poised for a sixth consecutive losing session as Middle Eastern conflicts push crude prices to $100 a barrel, triggering foreign outflows and pressuring the rupee.
Indian benchmark indices are staring down a sixth straight session of losses on Monday as a sharp escalation in geopolitical tensions reshapes the risk calculus for global and domestic investors. Brent crude has surged 10% this week to hit $100 a barrel, a move that threatens to rekindle inflationary pressures across importing nations like India.
The immediate catalyst for the oil spike is the intensifying conflict between the US and Iran, marked by a 13th consecutive night of American military strikes. The situation deteriorated further after Iran-aligned Houthi forces attacked two Saudi oil tankers in the Red Sea and announced a naval blockade on Saudi Arabia.
These developments overshadow a heavy domestic earnings calendar and shift focus toward the US Federal Reserve's meeting on July 28-29. While the central bank is widely expected to hold rates steady, LSEG data shows fed funds futures are pricing in a 38% probability of a 25-basis-point hike. That uncertainty is compounded by new Fed Chair Kevin Warsh's ongoing overhaul of the central bank's communication strategy, leaving Wall Street guessing about the policy path.
Elevated crude prices and geopolitical ambiguity have predictably weighed on foreign capital. Foreign institutional investors offloaded Rs 7,180 crore this week, though domestic institutional investors partially offset the drain by picking up Rs 8,640 crore in equities. Foreign flows are likely to stay volatile until the Middle East situation stabilizes.
The exodus of foreign capital has dragged the Indian rupee down for a fourth consecutive week. The currency slipped to around Rs 96.55 against the US dollar, retreating from earlier recovery highs near Rs 96.10. Traders are watching the Rs 96.60 to Rs 96.67 band as a critical resistance level; a breach there could push the rupee toward Rs 96.90.
Against this macro backdrop, the market will look to first-quarter earnings from major Indian corporations for direction. A crowded roster of results is due from sector heavyweights including Adani Enterprises, Adani Ports, Larsen & Toubro, Hindustan Unilever, Tata Power, Asian Paints, and Sun Pharma. Investors will be listening closely to management commentary for signs of margin pressure from rising input costs.
Technically, the outlook remains heavily skewed toward sellers. Sudeep Shah of SBI Securities noted that the index is trading below key short- and long-term moving averages, with the daily RSI at 43 and the MACD histogram stuck below zero. The immediate defense for the Nifty sits at the 23,650 to 23,600 zone, with a break below 23,600 opening the door to a deeper correction toward 23,300. On the upside, the 50-day EMA near 23,950 to 24,000 acts as a stiff ceiling.
