Indian equity benchmarks opened higher on Thursday, tracking gains among Asian peers, as investors weighed the prospect of another US Federal Reserve rate hike against domestic corporate earnings and rising crude oil prices.
The market outlook remained cautious after US consumer price inflation rose faster than expected, strengthening expectations of another rate increase this year. Higher US interest rates can make emerging markets such as India less attractive to foreign investors, who have sold Indian equities for 14 consecutive sessions through Wednesday.
Foreign investors' year-to-date outflows have reached a record $32.7 billion, adding to concerns over liquidity and near-term market performance.
Sensex, Nifty fall in previous session
The benchmark indices ended lower on Wednesday as investors booked profits following a sharp rally in the previous session. Rising wholesale price-based inflation and firm crude oil prices also weighed on sentiment.
The 30-share BSE Sensex fell 251.89 points, or 0.34%, to close at 72,781.89. During the session, it touched a high of 73,195.26 and a low of 72,578.75.
The 50-share NSE Nifty declined 99.25 points, or 0.44%, to settle at 22,622.70.
GIFT Nifty futures stood at 22,606.5 at 7.52 am IST on Thursday, indicating a potentially weak start for the Nifty 50, which had closed at 22,622.7 in the previous session.
Two traders said hotter-than-expected US inflation had raised concerns about tighter global monetary conditions, a negative factor for risk-sensitive assets such as emerging-market equities.
Crude oil prices and US rate outlook weigh on sentiment
Brent crude traded at around $104.5 a barrel as investors assessed supply risks arising from attacks on shipping through the Strait of Hormuz. Markets were also weighing US efforts to reduce petroleum shipping costs by easing sanctions on vessels.
Elevated oil prices remain a concern for India, a major crude importer, as they can increase import costs and put pressure on inflation and corporate margins.
Meanwhile, expectations of tighter US monetary policy could put further pressure on foreign investment flows into Indian equities. The sustained selling by foreign investors has added to the uncertainty surrounding the near-term market direction.
Wipro results, Jio Platforms IPO in focus
Investors are expected to track corporate earnings closely, with Wipro scheduled to announce its second-quarter results later on Thursday.
Technology stocks had rallied earlier in the week after HCL Technologies reported better-than-expected earnings. Market participants will now scrutinise Wipro's outlook for discretionary technology spending, deal conversions and margins for signals about demand across the information technology sector.
Strong activity in the primary market could also divert liquidity away from secondary-market stocks, potentially limiting near-term gains, two traders said.
Adding to the focus on new listings, Jio Platforms on Wednesday announced plans to raise up to $3.2 billion through an initial public offering (IPO), which would be India's largest public offering to date.
The IPO would value the group founded by Mukesh Ambani at approximately $108.3 billion. The proposed price band is ₹1,065 to ₹1,119 per share, equivalent to around $11.19 to $11.76.
Investors will monitor the proposed offering alongside earnings announcements and global economic signals as they assess the outlook for Indian equities.