Domestic indices likely to make cautious start as Middle East jitters weigh

Indian markets gave up their initial gains and ended lower on Monday led by a sell-off across sectors amid ongoing geopolitical concerns. Today, markets are likely to make cautious start amid weakness in global peers coupled with jump in crude oil prices overnight. Oil prices settled more than 3% higher on Monday, with Brent surpassing $80 per barrel for the first time since August as the increased risk of a region-wide Middle East war jolted investors out of record bearish positions amassed last month. The situation in the Middle East is escalating, with Hezbollah launching rockets at Haifa, Israel’s third-largest city. As Israel prepares to intensify its military operations in Lebanon, fears of a broader regional conflict are mounting, marking the one-year anniversary of the Hamas attack on Israel that initiated the Gaza war. Closer home, investors in India would also keep an eye on the counting of votes for assembly elections in the state of Haryana and Union Territory of Jammu and Kashmir. Exit polls indicated that the national party BJP suffered losses in two key provincial elections, with the main opposition Congress party and its allies projected to come out on top. However, some support may come with Commerce and Industry Minister Piyush Goyal’s statement that India is poised to attract $100 billion in investments from the United Arab Emirates in the coming years. Separately, he also said it is time for the Indian rupee to appreciate on the back of inflows in debt and equity markets. India now has the world's fourth largest armoury of foreign exchange reserves that crossed the $700-billion mark for the first time in September. Meanwhile, the Central Board of Direct Taxes (CBDT) has formed an internal committee to oversee a comprehensive review of the Income-tax Act, 1961 (Act), as was announced in the Union Budget 2024-25 by Finance Minister Nirmala Sitharaman. The goal is to make the Act concise, clear, and easy to understand, which will reduce disputes, and litigation, and provide greater tax certainty to taxpayers. E-commerce stocks will be buzzing with a private report that the Indian e-commerce market is expected to reach $325 billion by 2030, growing at a robust compound annual growth rate (CAGR) of 21%. There will be some reaction in alcohol beverages stocks as a report by rating agency ICRA stated that alcoholic beverages (alcobev) companies in India are expected to report a revenue growth of 8 to 10 per cent in this financial year supported by a revival in consumption of spirits. Cement industry stocks will be in focus with private report that the cement demand in September remained below the market expectations due to heavy monsoons and region-specific challenges which impacted both trade and non-trade demand.

The US markets ended lower on Monday followed rising Treasury yields as traders adjusted their expectations regarding Federal Reserve interest-rate cuts. Asian markets are trading mostly in red on Tuesday after household spending in Japan declined 1.9 per cent year-on-year, performing better than forecasts of a 2.6 per cent drop.

Back home, Indian equity benchmarks ended lower and extended the losing streak for the sixth consecutive session on Monday amid selling across the sectors, barring TECK and IT stocks. Worries over the escalation of the conflict in the Middle East weighed on investor sentiment. The markets opened higher as traders took support with a survey by Confederation of Indian Industry (CII) showing that private capital expenditure by India Inc. is likely to increase amid improving domestic demand despite a weak external environment and rising shipping costs. Some support also came as the Reserve Bank said India’s forex reserves jumped by $12.588 billion to a new all-time high of $704.885 billion for the week ended September 27.  Traders also took a note of Finance Minister Nirmala Sitharaman’s statement that India will witness the steepest rise in living standards of the common man on the back of the government’s initiatives and the efforts towards doubling per capita income in few years. However, key indices erased all the gains in late morning deals and slipped into red to end near day's lows. Traders turned cautious with report that foreign investors turned net sellers in October, offloading shares worth Rs 27,142 crore in just the first three days of October due to intensifying conflict between Israel and Iran, a sharp rise in crude oil prices, and improved performance of Chinese markets. Traders also remained on sidelines ahead of an upcoming RBI monetary policy meeting, the release of September-quarter corporate earnings and the outcome of state elections in Haryana and Jammu and Kashmir. Traders overlooked the Ministry of Labour & Employment’s statement that India has witnessed significant employment growth of nearly 36%, adding around 170 million jobs during 2016-17 and 2022-23. With a robust democracy, dynamic economy, and a culture that celebrates unity in diversity, India’s journey toward becoming a global powerhouse continues to inspire the world. Finally, the BSE Sensex fell 638.45 points or 0.78% to 81,050.00, and the CNX Nifty was down by 218.85 points or 0.87% to 24,795.75.