Indian equities could face another volatile week as investors track the US Federal Reserve’s meeting minutes, the US-Iran conflict, crude oil prices, institutional flows and gold movements. The Sensex ended the previous week 0.62 per cent lower at 78,009.25, while the Nifty dropped 0.83 percent to 24,366. Broader markets were mixed, with the MidCap index gaining 0.50 percent and the SmallCap index declining 0.66 percent. A major global trigger will be the release of minutes from the US Federal Open Market Committee’s July 28-29 meeting on August 19. Investors will look for clues on the future direction of US interest rates. At the meeting, policymakers voted 9-3 to keep the federal funds rate unchanged at 3.50-3.75 percent. Any indication about the timing of future rate moves could influence global equities, bond yields and foreign investment flows into emerging markets such as India. Developments in the US-Iran conflict will remain another key risk. Iran’s Deputy Foreign Minister Kazem Gharibabadi has reiterated Tehran’s position that the Strait of Hormuz has been, and will remain, under Iranian control. The waterway is critical for global energy supplies, making developments around the region important for oil-importing countries.
Crude Pressure
Oil prices will consequently remain firmly on investors’ radar. Crude futures climbed more than $1 a barrel on Friday amid tanker attacks and limited progress towards a peace agreement between the Trump administration and Iran. Persistently expensive crude could hurt India by increasing inflationary pressures and weakening the rupee. It may also squeeze margins of companies heavily dependent on energy and transportation. A further surge could dampen market sentiment and affect expectations surrounding domestic interest rates.
Fund Flows
Institutional activity will provide another important signal. Foreign institutional investors turned net buyers on August 14, purchasing shares worth Rs 12,854.44 crore and selling Rs 12,346.32 crore, resulting in net buying of Rs 508.12 crore. Domestic institutions also remained buyers, recording purchases of Rs 14,295.49 crore against sales of Rs 13,939.09 crore. Their net investment stood at Rs 356.40 crore. Gold movements will also be watched as investors assess demand for safe-haven assets amid continuing geopolitical uncertainty.
