After a day's hiatus, Indian benchmark indices are set to open for trading on Thursday, where they may see some heightened volatility during the session amid a host of domestic and global cues including Sebi's guidelines to curb F&O trading, rising geopolitical concerns and subdued global markets.
Nifty futures on the NSE International Exchange traded 79 points, or 0.30 per cent, lower at 25,734, hinting at a negative start for the domestic market on Thursday. Here are the key factors and levels of indices to watch out today:
SEBI's F&O curbs The capital markets regulator SEBI has announced a slew of majors to tame the rising volumes in the highly riskier futures & options (F&O) market in order to protect the interests of retail investors. These measures include limiting weekly expiry to one per exchange, increasing the contract size to Rs 15 lakh, upfront collection of option premium, removal of calendar spread treatment on expiry day and more.
The recent guidelines introducing new measures for derivative trading mark a pivotal moment for the Indian financial markets, said Puneet Sharma- CEO and Fund Manager at Whitespace Alpha. "SEBI aims to enhance market stability while safeguarding investor interests, reflecting the regulator's intent to balance risk management with market participation," it said.
The recent SEBI measures enhance market stability and play a crucial role in safeguarding investor interests, ensuring a more resilient derivatives market. Limiting weekly expiries to a single index on NSE and BSE could encourage a shift in trading volumes towards GIFT City, which still offers a wider range of weekly options, said Rohit Agarwal, CEO - Funds Business, Dovetail Capital.
Geopolitical concerns The war crisis continues to erupt between Israel & Iran-backed Hezbollah. As per a report from Reuters, Israel bombed central Beirut in the early hours of Thursday, killing at least six people, after its forces suffered their deadliest day on the Lebanese front in a year of clashes against armed group Hezbollah.
The second attack by Iran this year, after it fired hundreds of missiles and drones at Israel in April marks an unmistakable deterioration and a clear escalation of the regional war scenario. Israel will respond in a more than disproportionate manner because such military actions have inevitable consequences, said Dr Manoranajan Sharma, Chief Economist at Infomerics Ratings.
"There is no doubt about a massive Israeli retaliation, the only issue that remains to be seen is the scale, place and the timing of the retaliation. This escalation of the war, widening conflict and heightening of geopolitical tensions rocks the global scenario with incertitude and uncertainties," he said.
Crude oil prices Oil prices ticked higher in early trade on Thursday as investors weighed the escalating conflict in the Middle East and the potential for disruption to crude flows, against an amply-supplied global market. Brent crude futures increased 64 cents, or 0.87 per cent, to $74.54 a barrel. US West Texas Intermediate crude futures gained 72 cents, or 1.03 per cent, to $70.82 a barrel.
Israel may target Iranian oil production facilities among other strategic sites, suggest some media reports citing Israeli officials. Iran is an OPEC member with production of around 3.2 million barrels per day or 3 per cent of global output. Iranian oil exports have climbed this year to near multi-year highs of 1.7 million bpd despite US sanctions.
WTI crude oil prices surged as Israel intensified its assault on Lebanon, raising concerns over regional conflict, said Kaynat Chainwala, AVP-Commodity Research at Kotak Securities. "However, the likelihood of an all-out war between Iran and Israel remains low. The upcoming OPEC JMMC meeting is highly anticipated."
The escalating conflict between Israel and Iran has reignited crude oil prices. After recent dip due to a weaker demand outlook and talks of increased production by OPEC+ by December, crude is now hovering around $72, said Ajay Garg, Director & CEO at SMC Global Securities. "If the situation worsens, prices could rise to $76-$78 per barrel."
FIIs selling Despite being buyers in the current years, overseas investors have been pulling out funds from the Indian equities in the last two sessions. According to the data from NSE, FIIs sold Indian shares worth Rs 5,579.35 crore on Tuesday, October 1 on a net-net basis.
FII behaviour is cautiously optimistic, with $.3 billion invested in Indian stocks in September 2024, reflecting confidence in India’s stability and growth, said Shiv Kumar Goel, Director at Bonanza Group. "However, as the US elections approach, market volatility may rise, leading to profit-booking by FIIs," he said.
Global markets MSCI's global equities index was down slightly on Wednesday while the dollar rose and oil prices pared earlier gains, as investors digested US economic data and anxiously awaited Israel's response to Iran's missile attack the previous day. US stock also settled flat in the overnight trade.
Nifty outlook We are likely to get a pullback towards 25,950 – 26,000 and thereafter resume the next leg of the fall, said Jatin Gedia, Technical Research Analyst at Sharekhan. "Thus, traders should look for signs of weakness and resistance zones and initiate shorts. The correction can take the Nifty down towards 25,500 – 25,360," he said.
Nifty Bank outlook The Nifty Bank has turned slightly bearish after closing below 53,000. The index is currently sustained above its key support zone at 52,900 and 52,780, said Dhupesh Dhameja, Technical Analyst, SAMCO Securities. "If the index continues to hold above these levels, minor pullbacks could occur. However, weakness may materialize if it drops below 52,700, while resistance at 53,500 remains firm," he said.