Indian equity benchmarks opened lower on Monday as elevated crude oil prices, concerns over inflation and escalating tensions in the Middle East weighed on investor sentiment. Market participants also awaited the US Federal Reserve's monetary policy decision later this week for clues about the outlook for interest rates.
The decline followed a difficult week for domestic equities, with the Nifty 50 and BSE Sensex falling 2.4% and 2.2%, respectively. Both indices recorded losses in all four trading sessions last week as rising oil prices and geopolitical tensions unsettled markets.
GIFT Nifty futures stood at 22,608 at 7.46 am, indicating a muted opening for the Nifty 50, which had closed at 22,600 on Friday.
Crude oil prices keep market sentiment under pressure
Brent crude futures were trading at around $114.02 a barrel at 9.11 am on Monday, easing from a near six-month high of $117 reached after Indian markets closed on Friday.
Despite the retreat, oil prices remained elevated as continued attacks on Saudi Arabia heightened concerns over potential supply disruptions. Higher crude prices are a concern for India, a major oil importer, as they can increase import costs and add to domestic inflationary pressures.
Broader Asian markets also remained under pressure. MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.3%, reflecting cautious investor sentiment across the region.
US Federal Reserve decision in focus
Investors are closely watching the Federal Reserve's policy announcement later this week. Nearly all economists polled by Reuters expect the US central bank to keep interest rates unchanged at this meeting and raise them in December.
Policymakers have signalled patience despite persistent inflationary pressures that could warrant a tougher monetary policy response.
The trajectory of US interest rates is particularly important for emerging markets such as India. Higher rates in the United States can make Indian equities less attractive to foreign investors by increasing the appeal of dollar-denominated assets, including US Treasury securities.
Foreign institutional investment flows have nevertheless provided some support to domestic equities. Provisional data showed that foreign investors purchased Indian shares worth ₹890 crore ($93.74 million) on Friday. They were net buyers in three of the past five trading sessions.
Stocks to watch
Infosys
Shares of Infosys will be in focus after the information technology major lowered its annual revenue growth forecast amid deepening weakness in its key North American market. The revised outlook highlights the challenges facing traditional IT services companies as artificial intelligence reshapes the industry.
Kotak Mahindra Bank
Kotak Mahindra Bank will be watched after the lender reported a quarterly profit above market expectations. Stronger loan demand and lower provisions for bad loans supported its performance.
Dr Reddy's Laboratories
Dr Reddy's Laboratories will also be in focus after the pharmaceutical company posted a better-than-expected quarterly profit. Strong domestic demand helped offset a slowdown in its key US market.
With crude oil prices remaining elevated and the Federal Reserve's decision approaching, investors will monitor global developments, foreign fund flows and company-specific earnings for further direction in the domestic stock market.