Global signals remain negative and are expected to weigh on markets despite a positive surprise on Friday in the form of India’s third quarter GDP figures of 7.8%, reflecting the broad-based strength of the economy.Kranthi Bathini, Director-Equity Strategy at WealthMills Securities said that after weeks of uncertainty, the inevitable finally happened. The Street expected that conflicts would sooner or later lead to war, he said.
Bathini sees choppy trading on Monday and expects sharp cuts that could persist in the short term. Crude oil’s trajectory will remain a key trigger for domestic markets and levels around $80 per barrel could be a strong negative, the WealthMills expert said.
His advice to investors is to stay invested and use corrections to buy on dips over the long term.
Bathini said the world has seen two major conflicts in the past four to five years: the war between Russia and Ukraine and the conflict between Israel and Hamas, which escalated to Iran when the US bombed its nuclear facilities. “The Iranian response will determine the course of the conflict,” Bathini said. Expert Anuj Gupta also expects markets to open with cuts. He advises investors to reduce their existing positions and wait for things to develop before taking new positions.
India’s benchmark indices Nifty and the BSE Sensex ended with deep cuts on Friday amid selling pressure across the board. The auto, financial and FMCG sectors remained major laggards, while the IT sector saw selective buying. In a volatile session, the broader Nifty fell 317.90 points, or 1.25%, to close at 25,178.65, while the 30-share Sensex fell 961.42 points, or 1.17%, to settle at 81,287.19.
What happened?
Iran currently has a self-imposed cap on its ballistic missile program, limiting its range to 2,000 kilometers (1,240 miles), The Associated Press reported. That brings the entire Middle East and part of Eastern Europe within reach. There is no public evidence that Iran wants intercontinental ballistic missiles, although Washington has criticized its space program for potentially allowing them one day, the report said.
Iran has insisted it no longer enriches uranium, but it has stopped international inspectors from visiting sites the United States bombed during the 12-day war in June.
The AP report said it analyzed satellite photos showing new activity at two of those locations, indicating Iran is trying to assess and possibly recover material there.
Before the attacks, Trump built up the largest U.S. military presence in the Middle East in decades. The arrival of the aircraft carrier USS Abraham Lincoln and three guided-missile destroyers in late January boosted the number of warships in the region.
Explosions in northern Israel and sirens in Jordan
Explosions rocked northern Israel on Saturday as the country tried to intercept incoming Iranian missiles after launching a nationwide attack with the US on Iran. The blasts echoed just after the Israeli military said it would use its air defense systems to shoot down Iranian fire.
There was no immediate word of any damage or casualties from the ongoing attack.
Meanwhile, Israel said its air defenses will be activated and issued a nationwide warning.
Global signals
Global signals remain largely negative. Wall Street’s frontline indexes closed with cuts on Friday. The Dow Jones fell more than 521.28 points or 1% to end the day at 48,977.90. The Nasdaq Composite fell 210 points, or 1%, to 22,668.20. Meanwhile, the S&P 500 Index also ended in the red, but the decline was less severe at 0.43%.
European markets also showed a gloomy mood, with major indices such as Spain’s IBEX 35 and France’s CAC 40 falling to 0.73%. Germany’s Dax finished flat, while the Stoxx 600 and Britain’s FTSE 100 index rose 0.6% and 0.1%.
Technical view
Bajaj Broking said volatility is likely to remain elevated amid uncertain global cues. “On the higher side, Friday’s breakdown area of 25,400-24,500 is likely to act as immediate resistance. Bias remains low. Continued weakness below last week’s low (25,141) will open further downside towards 25,000-24,800 levels in the coming weeks, concurring with 52-week EMA and key retracement,” the broker said.
While decoding the graph, Dr. Ravi Singh, Chief Research Officer of Master Capital Services, said the index has breached its critical 25,300 support and the 200-day EMA, signaling a bearish shift in short-term momentum. For the coming week, the psychological limit of 25,000 is the make-or-break level, and a break here could push prices towards 24,800. On the plus side, 25,350 and 25,600 now act as solid hurdles, Singh said.
“The strategy will continue to rise until the index definitively returns to 25,600. Expect continued volatility as the market looks for a stable bottom,” the analyst said.
Also read: Conflict between Iran and Israel: expect a gap-up opening in gold and silver. Here’s how to trade precious metals on Mondays
(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)
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