MUMBAI: The Indian equity market is likely to see further pressure in the coming sessions over rising geopolitical tensions after Iran launched an attack on Israel late Tuesday. Further new SEBI regulations for futures and options (F&O) trading and concerns over not-so-robust corporate growth in the upcoming earnings season are expected to weigh on investors' sentiments.
The US market ended lower on Tuesday with the tech-heavy Nasdaq index losing more than 1%. The US stocks began the Wednesday trading session in the red as well.
The Nifty has already plunged about 480 points in the last five trading sessions - falling from its all-time high of 26,277 to 25,797 at Tuesday's close. On Wednesday, the market was closed due to Gandhi Jayanti. Technical analysts expect further pressure with the Nifty index set to test the 25,600 level on the downside.
Shrikant Chouhan, Head of Equity Research at Kotak Securities, noted that as long as the index remains below 25,910, weak sentiment is likely to persist. He mentioned that the markets could retest the 25,680-25,650 range, with this support level acting as a key trend indicator for bulls.
Rupak De of LKP Securities said that Nifty formed a doji pattern with a long upper shadow on the daily chart, indicating market indecision. “Heavy call writing at 25800 suggests it may act as strong resistance if sustained. Immediate support lies at 25750, and a decisive break below this could push the index to 25,600/25,500. On the higher side, a move above 25,800 may propel Nifty towards 26,050, where sellers could become active again,” added De.
Meanwhile, Christopher Wood, global head of equity strategy at Jefferies, has cut exposure to Indian equities by 1 percentage point on Wednesday. However, he remains ‘overweight’ on the Indian markets. Wood has increased the weight of China by two percentage points.
Wood cited the risk of geopolitical tension in the Middle-East in his latest note, which he sees as the biggest global equity markets. "In case of an escalation of the crisis, all global markets, including India, will be hit badly, which they are not yet prepared for" he said.
Prashanth Tapse, Sr VP Research analyst at Mehta Equities said that the ongoing Israel-Iran war and geopolitical tensions always comes with risk to global commodities and crude oil being the global commodities gets impacted on prices through lower economic activity or higher risks to commodity supply.
Crude oil prices have surged to USD 75 per barrel following the missile attack on Israel. Analysts believe that is the war escalates further, the crude price may reach as high as USD 85 mark.
“Iran is very important as the crude oil output is up 20% in 2 years to 3.3% of global supply so any attack and war between these countries raises fears of supply disruptions in the Middle East. The spike in crude would be short-lived by nature but it will remain volatile for the rest of the H2FY2025 as war headlines will be on the frontline in the near to short term,” said Taspe.