Analysts: Geopolitical Tensions & Oil Prices Key to Market Performance

Stock Markets This Week: West Asia Conflict and Crude Oil Prices to Drive Investor Sentiment​

New Delhi, March 8: Developments related to the ongoing conflict in West Asia and the resulting movement in crude oil prices are expected to remain the key factors influencing the direction of Indian stock markets this week.

Market participants are likely to closely monitor geopolitical developments along with global market trends and trading patterns of foreign investors, which are expected to play an important role in shaping investor sentiment.

Crude Oil Prices and Geopolitical Developments in Focus​

Analysts indicated that fluctuations in global crude oil prices will remain a major external variable for the markets. Brent crude, the global oil benchmark, surged 8.52 percent to reach USD 92.69 per barrel, reflecting heightened geopolitical risks and supply concerns.

Ajit Mishra, SVP Research at Religare Broking Ltd, said that movements in global crude prices and geopolitical developments in West Asia will remain critical in determining market direction in the coming days.

He also noted that the week will include important macroeconomic data releases that could influence short term sentiment among investors.

CPI Inflation Data to Be Closely Watched​

On the domestic front, investors are expected to closely track India’s Consumer Price Index inflation data scheduled for release on March 12. The inflation reading will provide important cues about the country's price environment and could influence market expectations regarding economic stability and policy outlook.

Foreign Investor Activity and Currency Movement Key Indicators​

Market observers said that foreign institutional investor activity and currency movements will remain key indicators for investors. These factors often reflect global capital allocation trends and the level of investor confidence in emerging markets such as India.

Ponmudi R, CEO of Enrich Money, said the week ahead may remain volatile as geopolitical tensions in the Middle East continue to dominate investor sentiment. He noted that developments in energy markets, particularly crude oil price movements, will significantly affect overall risk appetite.

Sharp Market Losses Last Week​

Indian equity benchmarks ended the previous holiday shortened week with steep losses. The BSE benchmark index declined by 2,368.29 points, or 2.91 percent, while the Nifty fell 728.2 points, or 2.89 percent.

Analysts said escalating geopolitical tensions in West Asia and the sharp spike in crude oil prices weighed heavily on investor sentiment, contributing to the market decline.

Foreign Investors Pull Out Funds​

Foreign investors have also reduced their exposure to Indian equities in recent sessions. Over the last four trading days, foreign investors withdrew about Rs 21,000 crore, equivalent to around USD 2.3 billion, from the equity market.

V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said that uncertainty surrounding the Middle East conflict, the continued decline in the market, the vulnerability of the Indian economy to higher crude prices, and the depreciation of the rupee have all contributed to sustained foreign investor selling in the cash market.

He added that foreign portfolio investors are unlikely to return as buyers until there is greater clarity regarding the outcome of the conflict and crude oil prices show signs of easing.

Escalation in West Asia Conflict​

Tensions in the region intensified after the United States and Israel carried out military strikes on Iran on February 28, resulting in the death of Iran’s supreme leader Ayatollah Ali Khamenei.

Following the strikes, Iran launched a series of retaliatory attacks targeting Israeli and American military bases located in several Gulf countries, including the UAE, Bahrain, Kuwait, Jordan, and Saudi Arabia.

The evolving situation in West Asia continues to be closely watched by global markets, particularly due to its potential impact on energy supply and global economic stability.