Markets likely to get negative start amid escalating geopolitical tensions in Middle East

Indian markets bled heavily on Thursday, as a fresh flare up in Iran-Israel tensions soured Dalal Street sentiment. Today, markets are likely to get negative start amid escalating geopolitical tensions in the Middle East. The fallout from Israel's airstrikes on central Beirut, which resulted in at least six fatalities, has left investors anxious as the region braces for further escalation. This action followed Israel’s deadliest day on the Lebanese front in a year of ongoing clashes with the Iran-backed group Hezbollah. Also, the surge in oil prices is adding to the uncertainty, with Brent crude leaping more than 5 per cent on Thursday, marking its biggest rise in a year. This also marked oil’s third consecutive session of gains as concerns grew that Israel might target Iran's oil industry in retaliation for Tehran’s recent ballistic missile attack. Foreign fund outflows likely to dent domestic sentiments. On October 3, Foreign Institutional Investors (FIIs) sold shares worth Rs 15,243.27 crore. Investors will be eyeing services PMI data to be out later in the day for more directional cues. However, some respite may come later in the day as the Union Cabinet approved two schemes-PM-Rashtriya Krishi Vikas Yojana (PM-RKVY) and Krishonnati Yojana-to improve farmers' income and food security, allocating Rs 1,01,321 crore. Meanwhile, Minister of Commerce and Industry Piyush Goyal and US Commerce Secretary Gina Raimondo held the 6th Commercial Dialogue on Thursday during which they reviewed the progress made in semiconductors supply chains, innovation handshake, energy-industry network and the Indo-Pacific Economic Framework for Prosperity. A day earlier, the two leaders signed a new memorandum of understanding (MoU) to expand and diversify critical minerals supply chains, with the aim of leveraging the two countries' complementary strengths to ensure greater resilience in the critical minerals sector. There will be some reaction in logistic stocks with a private report that the Indian logistics market, valued at Rs 9 trillion in FY23, is projected to grow significantly, reaching Rs 13.4 trillion by FY28, registering a compounded annual growth rate (CAGR) of 8-9 per cent. Moreover, Diffusion Engineers will list on the BSE and NSE today.

The US markets ended lower on Thursday ahead of the highly anticipated monthly payrolls report. Asian markets are trading mixed on Friday, as concerns over escalating tensions in the Middle East made investors cautious ahead of the September US payrolls data.

Back home, Indian equity benchmarks witnessed massive selling pressure and settled near day’s low points on Thursday amid an escalation of war between Israel and Iran and after markets regulator SEBI tightened the norms for futures and options (F&O) to curb speculative trading. Key gauges made a gap-down opening and continued to drift lower to close deep in the red, as the foreign institutional investors (FIIs) extended their selling as they sold equities worth Rs 5,579 crore on October 1. Traders were anxious as Goods and services tax (GST) revenue growth rate declined to 6.5 per cent in September at Rs 1.73 lakh crore as the rise in collections from domestic transactions as well as imports slowed. In August 2024, the mop-up was Rs 1.75 lakh crore. In the second half of the session, bears were seen tightening their grip on Dalal Street with both indices ending with losses of over two percent each, amid selling across the sectors. Sentiments remained down-beat with a labour ministry statement stating that retail inflation for industrial workers inched up marginally to 2.44 per cent in August against 2.15 per cent in July this year. The All-India CPI-IW (Consumer Price Index-Industrial Workers) for August 2024 decreased by 0.1 points and stood at 142.6 points. Traders overlooked the data made available by state-run weather bureau India Meteorological Department showing that  southwest monsoon rains in India hit four years high this season, experiencing about 108 per cent of the long period average at 934.8 mm. A rainfall of 868.6 mm is the long period average in India. Above-normal monsoon rains helped farmers sow more crops this Kharif season and it bodes well for the overall agriculture sector, which is the mainstay source of livelihoods for millions of Indians. Finally, the BSE Sensex fell 1769.19 points or 2.10% to 82,497.10, and the CNX Nifty was down by 546.80 points or 2.12% to 25,250.10.