Indian markets are set for a strong gap-up opening, thanks to de-escalation talks between Iran and the US. The Gift Nifty at 23,814 indicates a sharp rebound of over 800 points for Nifty at open. Analysts expect the market to see value buying at lower levels as
Ceasefire eases energy concerns
“The key trigger is the announcement of a two-week pause in US military action, alongside Iran’s agreement to facilitate safe passage through the Strait of Hormuz. This has significantly reduced immediate concerns around energy supply disruptions, which had been a major overhang for global markets,” said Hariprasad K, Founder, Livelong Wealth
Global cues turn supportive
Global cues have turned firmly supportive. US markets have moved higher, while Asian markets such as Japan and South Korea are seeing sharp gains of over 5 per cent, indicating a broad-based risk-on sentiment. The easing of geopolitical tensions has led to a sharp decline in global crude oil prices, which is particularly positive for India on both inflation and currency fronts. Crude slumped sharply below $100, while Gold and silver prices rose.
Volatility likely to ease
Volatility is likely to ease in today’s session. “India VIX, which closed near 24.7, may see further cooling as fear unwinds, leading to some moderation in option premiums and improved trading conditions, he further added.
Improved market sentiment
According to Ponmudi R, CEO of Enrich Money, the near-term narrative has shifted toward a more constructive tone, with the potential for broad-based buying interest, particularly in sectors that had come under pressure amid elevated oil prices and geopolitical concerns. U.S. President Donald Trump announced the ceasefire ahead of a previously indicated strike deadline, with the agreement linked to the reopening of the Strait of Hormuz for global shipping. Iran has signalled conditional acceptance, while Israel has paused operations. “Although the situation remains fragile, with reports of minor violations, the development has created a narrow window for diplomatic engagement and reduced near-term escalation risks, he cautioned.
Focus on RBI policy outcome
Meanwhile, all eyes are on the outcome of today’s RBI meeting. More than rate announcements, the focus will be on the RBI’s views on the Indian economy after the Iran-US war.
Outlook on rates and liquidity
RBI pre-MPC quote by Prashant Pimple, CIO – Fixed Income at Baroda BNP Paribas Mutual Fund, said: “The West Asia war added an unexpected twist to India’s macro-outlook, highlighting our pain points as an economy dependent on external energy supplies. Elevated crude prices for long will have spillovers on domestic inflation and negative fiscally. Apart from that an uncertain growth environment is hurting growth through slower exports, pressure on currency and changing global flows. The current dynamics stemming out of external reasons are hurting both growth and inflation. We expect RBI to reflect a cautious tone on inflation but also be cognizant of growth dynamics in the country, which have recently stabilised post GST rationalisation and monetary support. It is important to note that, domestic yields are already under pressure and closer to 2024 levels, when RBI was on a long pause and repo was at 6.5%, restrictive enough to contain inflation shocks. Therefore, we expect RBI to maintain the status quo on policy rates. We also expect RBI to reiterate its commitment to maintaining adequate liquidity to support the needs of the economy. However, the RBI will probably be strategic in its liquidity infusion measures given near term pressure on the currency.