Domestic markets are likely to open on a weak note on Tuesday. Analysts said India is facing multiple headwinds such as a weakening rupee, unabated selling by foreign portfolio investors, pressure on foreign reserves and a widening current-account deficit. The Prime Minister Narendra Modi has been emphasising on austerity measures such as cutting on travel, reducing gold buying and using EVs due to macroeconomic pressures.
Gift Nifty at 23,680 signals another gap-down opening of about 180 points.
With no end to the conflict in sight, domestic brokerage, JM Financial, believes that investors should brace for austerity measures. The government should continue to address these issues through coordinated fiscal and monetary policies. Yields hardened 15bps to close above 7 per cent, factoring in the likely fiscal impact.
“We believe that the PM’s speech should be considered as market signalling before the actual measures are announced in the coming weeks if the conflict continues. Such fiscal and monetary measures would cushion the currency (INR) from further depreciation. On a prescriptive note, the government should focus on increasing strategic petroleum reserves to manage such supply disruptions,” it added.
Meanwhile, global stocks are mixed and volatile. While Japan’s Nikkei eked out marginal gains, Korea’s Kospi slipped over 1 per cent, after opening on a firm note.
Overall, market sentiment remains fragile, highly headline-driven and sensitive to geopolitical developments, with crude oil trends, currency movement and institutional flow dynamics expected to remain the key drivers of near-term market direction, said Ponmudi R, CEO of Enrich Money,
Crude oil prices remain elevated, currently consolidating in the $97–100 range, reflecting a sustained geopolitical risk premium and ongoing supply-side concerns. Persistently high energy prices continue to raise concerns around inflationary pressures and macroeconomic stability for oil-importing economies such as India. On the currency front, USD/INR remains elevated near the 95.3 mark, highlighting continued weakness in the Indian rupee amid firm dollar demand, elevated crude prices and cautious foreign institutional positioning. Foreign institutional investors (FIIs) continue to remain net sellers, while domestic institutional investors (DIIs) provide partial support through steady domestic buying activity.
Volatility is expected to remain elevated, with India VIX surging nearly 10 per cent in the previous session to around 18.5. Despite today being a weekly expiry, elevated VIX levels are likely to keep option premiums expensive, limiting the usual pace of theta decay and making expiry dynamics more volatile than usual, said Hariprasad K, SEBI-registered Research Analyst and Founder, Livelong Wealth.
For Indian markets, today’s major domestic trigger will be the release of April CPI inflation data. The inflation print will be closely tracked as rising crude oil prices continue to fuel concerns around imported inflation, pressure on household consumption, and the RBI’s policy outlook going forward, he added.