Oil prices, bond yields to drive equities amid US-Iran tensions

• Crude oil prices remain a key trigger for Indian equities.
• Higher bond yields could pressure emerging-market assets.
• Foreign investor selling remains in focus.
• IPO activity is set to remain strong with 20 issues.

By Anjali Sharma
WASHINGTON – According to media reports on Sunday, Indian stock markets are likely to remain sensitive to developments in the US-Iran conflict, crude oil price movements, and changes in bond yields during the holiday-shortened trading week.

It said that investors are expected to track domestic economic data, foreign investor flows and a series of key indicators from the US for cues on market direction.

The focus on West Asia remains particularly strong for Indian equities as any further escalation between the US, Israel and Iran could put additional pressure on crude oil prices.

Iran said that diplomacy was the only way to resolve the conflict, after US President Donald Trump said he had rejected an Iranian proposal involving the reopening of the Strait of Hormuz and an end to hostilities.

Crude oil has emerged as a major market trigger since late February, when US and Israeli strikes on Iran intensified the conflict in West Asia.

The higher oil prices are closely watched because the country relies heavily on imports to meet its crude requirement.

A sustained increase in energy costs can raise inflationary pressures and affect corporate margins.

The domestic equity market recorded its longest run of weekly declines in six years. Rising crude prices, higher bond yields and concerns over inflation weighed on investor sentiment.

Bond yields will remain another key factor for equity investors this week.

Higher yields can tighten financial conditions and potentially reduce the appeal of emerging-market assets for global investors, particularly when compared with relatively safer fixed-income investments.

Foreign portfolio investor activity is also likely to remain in focus.

The recording positive inflows in July and August, foreign investors have turned net sellers again.

Equity outflows through exchanges stood at Rs 25,682 crore during the month through August 25, according to the data cited in the market outlook.

The rupee ended 24 paise higher at Rs 95.75 against the US dollar.

Currency movements will continue to be monitored closely alongside crude prices, particularly because a weaker rupee can increase the domestic cost of imported commodities such as crude oil, reports stated.

On the domestic front, investors will track the upcoming industrial production data for August and the HSBC manufacturing PMI reading.

These indicators will provide fresh clues about the health of India’s manufacturing and broader economic activity.

Global cues will also remain important, with several US economic data releases scheduled during the week.

Markets will assess these numbers for signals on the strength of the US economy and the direction of global interest rates.

The primary market is also set for a busy week. As many as 20 IPOs are scheduled to open for subscription, collectively seeking to raise around Rs 1,292 crore.

The secondary market facing pressure from global risks, investors will closely watch subscription trends and listing performance in the primary market for indications of retail and institutional appetite for new equity offerings.