Indian Stock Market Update: Key Overnight Changes Impacting Gift Nifty

Indian Stock Market Update: Key Overnight Changes Impacting Gift Nifty

New Delhi, October 3, 2024 – As the Indian stock market prepares to open on Thursday, a mix of global developments, geopolitical tensions, and regulatory changes are set to shape the day’s trading activity. The Gift Nifty is currently indicating a lower start, reflecting a gap-down trend for the Nifty 50 and Sensex indices. Key factors such as the rising conflict between Iran and Israel, new SEBI regulations on equity derivatives, and updates from global markets are all expected to influence the market’s movement today.

Geopolitical Tensions: Iran-Israel Conflict Escalates

The Middle East is witnessing heightened tensions after Iran launched a missile attack on Israel on October 1, which has raised fears of a broader conflict. In response, Israel has initiated limited ground incursions into Lebanon, targeting the Iran-backed Hezbollah militia. This conflict has intensified investor concerns, leading to volatility in global markets. Crude oil prices have risen due to fears of disruption in oil supply chains, further contributing to market instability.

Global Market Cues

The global markets offered mixed signals overnight. US stock markets managed to close with modest gains on Wednesday, driven by technology stocks. The Dow Jones Industrial Average added 39.55 points, closing at 42,196.52, while the S&P 500 rose slightly by 0.01%, settling at 5,709.54. However, Nasdaq Composite saw a marginal increase of 14.76 points, ending at 17,925.12.

While the Asian markets are trading higher, Japan’s Nikkei 225 and Topix rose by 2.57% and 2%, respectively. However, the Hang Seng Index in Hong Kong is expected to open slightly lower. Markets in China and South Korea are closed due to national holidays.

Gift Nifty Outlook

At present, Gift Nifty is trading around 25,725, reflecting a discount of nearly 250 points from the previous close of Nifty futures. This indicates a likely gap-down opening for the Indian stock market indices.

SEBI’s New F&O Rules

In a significant regulatory change, SEBI has introduced tighter rules for equity derivatives trading. The new regulations aim to raise the entry barrier for investors and make the asset class more expensive to trade. SEBI has reduced the number of weekly options contracts available to just one per exchange and increased the minimum trading amount by nearly three times. These changes are expected to impact the overall market sentiment, particularly in the derivatives segment.

Key Economic Data: US Private Payrolls and JOLTS Report

The latest US economic data also played a crucial role in shaping global market expectations. The ADP National Employment Report revealed that US private payrolls rose by 143,000 jobs in September, surpassing expectations of 120,000. Meanwhile, the Job Openings and Labor Turnover Survey (JOLTS) showed a surprise increase in job openings, which climbed by 329,000 in August to 8.04 million. These reports indicate that the US labor market remains robust, despite recent concerns about economic slowdown.

Oil Prices Surge Amid Middle East Tensions

With tensions in the Middle East on the rise, crude oil prices saw significant upward movement. Brent crude futures jumped by 0.87%, trading at $74.54 per barrel, while West Texas Intermediate (WTI) crude futures rose by 1.03%, reaching $70.82 per barrel. This spike in oil prices reflects concerns over potential disruptions in oil supplies due to the escalating conflict between Iran and Israel.

US Federal Reserve: Rate Cut Expectations Rise

In response to softer economic data and rising geopolitical risks, expectations of a rate cut by the US Federal Reserve have surged. The CME Group’s FedWatch Tool indicates a 65.7% probability of a 0.25% rate cut in the Fed’s November meeting, compared to 42.6% just a week ago. This shift in expectations may provide support to global equities, including Indian markets.

Other Key Developments

• Japan’s PMI Data: Japan’s service sector activity continued to expand for the third consecutive month in September. The final au Jibun Bank Service Purchasing Managers’ Index (PMI) stood at 53.1, slightly lower than 53.7 in August.
• US Manufacturing PMI: The Institute for Supply Management (ISM) reported that the US manufacturing PMI remained unchanged at 47.2 in September, marking the sixth consecutive month below the 50 threshold, indicating contraction.
• Currency Market: The US dollar rose to a one-month high against the yen, trading at 146.575 yen. The dollar index also climbed to a three-week high of 101.70. The euro and British pound were largely unchanged at $1.10455 and $1.3261, respectively.

Market Strategy for the Day

Given the current geopolitical risks, regulatory changes, and global market cues, the Indian stock market is expected to remain volatile. Investors should remain cautious and focus on stock-specific opportunities as companies begin announcing pre-quarterly updates ahead of the earnings season. With mixed signals from global markets and the escalating Middle East crisis, risk management and careful selection of stocks will be key to navigating today’s session.