The markets were on the back foot from the get-go as oil and risk factors made an appearance, even if there was good momentum coming in from last Friday. Gift Nifty was in the 24,056 area, some 186 points under Nifty futures, which was all it took to signal a gap-down for those making their way into the day’s Middle East volatility.
The early going made the risk-off mood plain to see. The Sensex was down 630 or so to 76,938.42 and the Nifty to 24,030. At one point the selling carried the Sensex to 76,857.43 and the Nifty to 24,000.20, undoing much of the work done on Friday when the two closed at 77,569.39 and 24,206.90 respectively.
Oil shock and geopolitics
There was a move in oil once US-Iran hostilities reared their head. Some mixed signals on the Strait of Hormuz left supply questions in the air. Brent was up 3.88% to $78.96 and WTI 4.01% to $74.27, enough to put inflation and the prospect of tighter financial conditions back on the agenda.
Word on the street is that the US has been more aggressive in its strikes on Iran. For every Iranian claim of a closed Hormuz, there is a US official saying the waterway is fine. With India’s import costs in the balance, this kind of standoff over shipping was a big part of Monday’s underperformance in equities.
Risk-off tone across markets
You could see the divergence in Asia as investors did some rethinking. The Nikkei 225 in Japan was off 0.61%, with the Topix holding its own. Over in South Korea the Kospi was down 1.74% but the Kosdaq was in the green by 0.73%. And with Hang Seng futures in Hong Kong looking for a positive open, the picture was a bit of a patchwork.
Wall Street put in a solid close on Friday, with the chip stocks in front of the pack before the earnings run-in. The Dow was 0.29% better at 52,637.01, the S&P 500 0.42% at 7,575.39 and the Nasdaq 0.29% at 26,281.61. On a weekly basis, the S&P 500 and Nasdaq are in the plus column by 1.2% and 1.7%, while the Dow is 0.5% in the red.
All eyes were on the semis and platform companies. Nvidia put on 4.03%, AMD 2.04% and Meta 5.97%. Micron and Moderna had the other end of the stick, down 1.24% and 10.83%. Then there was the strong showing from SK Hynix; after ADRs were set at $149, the US-listed stock finished 12.76% up at $168.01 in a deal that has brought in well over $26 billion.
Bonds, dollar and commodities recalibrate
US rates have been pushed up a bit by the latest in oil, as the market has to make room for the inflation risk.
Yields on the two-year Treasury inched up to 4.24%, a 3 bps move that put it at a level not seen since February 2025; the 10-year was up 2 bps to 4.58%. JGBs, for their part, were in a better mood, with the 10-year at 2.735%, the 20-year at 3.710% and the five-year at 1.970%.
With rate expectations hardening, gold could not hold its luster. Spot gold was down 1.2% at $4,072.78 an ounce, and August futures gave back 0.8% to $4,081.70. Silver also took a hit, off 1.6% to $58.89. The dollar put in a solid performance, the DXY edging 0.2% higher to 101.07. That left the euro at $1.1403, the pound at $1.3383 and the yen at 161.92.
Domestic breadth and flows
There were losses to be had, but they were not across the board. You see some staying power in Media, IT and Midsmall Healthcare, even as the rest of the indices pulled back – Nifty Metal is one example, at -1.05%. On the flip side, names like TCS, HCL Tech, Tech Mahindra, NTPC, PowerGrid and Axis Bank were in demand. IndiGo, Tata Steel, Asian Paints, Bajaj Finance, Eternal and Maruti were among the early laggards.
Volatility made a small show of itself. The India VIX is up 7.67% to 13.19, in step with the risk re-pricing we are seeing in other assets. But the money has been flowing in. DIIs have been net buyers to the tune of 2,020 crore in the latest session, 4,484 crore over the past week and 39,118 crore in the last month. FIIs/FPI numbers are 2,604 crore for the day, 4,427 for 7 days and 1,975 for 30.
Strategy and what to watch
The word from the desk is to be selective, given the headwinds from oil. “The overall picture is more constructive, but the playbook is to buy the dip,” says Ajit Mishra of Religare Broking. “Focus on banking, pharma and realty and be choosy in the rest of the market.”
Then there is crude, which is the make-or-break for India. Brent at $79 is fine, but if it gets above $90, you can expect a pullback as those energy costs work their way into inflation and margins, notes VK Vijayakumar of Geojit Investments.
This week brings a host of domestic data points. June’s CPI and WPI, the unemployment and trade figures, forex reserves and the first round of Q1 FY27 results will all be under the microscope to see if home-grown strength can stand up to global noise.
Key signals on the dashboard
A few things to keep an eye on:
– Brent in the $79 range is no trouble
– Go over $90 and equities may take a hit
– A discount on the Gift Nifty is a warning
– India VIX is 13.19 (up 7.67%)
– Sector direction will come from Q1 FY27 talk
The bottom line
It is not so much a change in how India’s earnings are running, but in the price of oil and the risk premium. With the situation in Hormuz still up in the air, the likely course of action is to sell any upside and be ready to pick up on the way down. For now, the smart money is in cash-heavy defensives and a handful of financials.
