Analysts predict that the main factors determining stock market dynamics next week will be related to developments in the Middle East conflict, crude oil prices, and US inflation data.
Furthermore, domestic stocks will be influenced by foreign investor trading activity and general global market trends. Ajit Mishra, Senior Vice President of Research at Religare Broking Ltd, noted that the current week is expected to be extremely sensitive to global monetary policy, crude oil prices, and the geopolitical situation.
He added that investors will closely monitor how stronger-than-expected US employment data affects expectations regarding the Federal Reserve's September decision.
Mishra also emphasized that domestically, investors will continue to track institutional flows of foreigners, the rupee exchange rate, crude oil prices, and domestic liquidity levels. He specifically noted that events around the Strait of Hormuz will remain a critical point of observation due to their implications for India's inflation, external balance, and corporate profitability.
According to Pommudy R, CEO of Enrich Money, rising tensions between the US and Iran, along with concerns surrounding the Strait of Hormuz, have increased the geopolitical risk premium in global energy markets. Brent crude rose by more than 8 percent in a week, and WTI crude rose by more than 9 percent.
Hariselvan Radhakrishnan, Founder and CEO of HST Wealth, stated that after the release of US employment data, which was stronger than forecasts and indicates sustained economic momentum, attention shifts to upcoming US inflation data. This data could play a decisive role in shaping expectations regarding Federal Reserve policy and global market sentiment.
He also noted that the direction of treasury bond yields and interest rate expectations will be closely linked to the inflation narrative, while high oil prices amid the unresolved Middle East conflict are likely to remain a constant pressure on market sentiment.
Last week, the BSE Sensex index, comprising 30 stocks, fell by 749.08 points, or 0.96 percent, and the NSE Nifty index, comprising 50 stocks, dropped by 277.95 points, or 1.14 percent. Pommudy noted that Indian stock markets showed volatility and were under pressure throughout the week. The Nifty-50 index continued its streak of declines for the fourth consecutive week, the longest such streak in the last five months, as escalating tensions between the US and Iran triggered a sharp rise in crude oil prices and kept risk sentiment tense.
Pommudy concluded that global markets enter the week facing a familiar set of challenges, where prospects depend on expectations regarding US monetary policy, elevated crude oil prices, and the evolving geopolitical situation in the Middle East.