D-Street rebounds despite rising US-Iran tensions

Synopsis

On Friday, Indian stock markets experienced a notable bounce back, partially reversing previous losses. Nevertheless, escalating global tensions, especially those involving the US and Iran, led to a more cautious approach among investors. By the end of the week, both the Nifty and Sensex showed positive gains. Crude oil prices saw an uptick amidst concerns of potential military conflict.

Indian equities staged a technical rebound on Friday, recovering a portion of the previous session's losses, but sentiment remained shaky with the US-Iran tensions looming over the markets. The rebound helped equities eke out gains for the week, even as the stock market's fear gauge, Volatility Index (VIX), resumed its climb, rising 6.7% on Friday to 14.36 after jumping 10% the previous day.

On Friday, NSE's Nifty rose 116 points or 0.5% to close at 25,571. BSE's Sensex rose 316 points or 0.4% to end at 82,814. Both indices, which fell 1.4-1.5% the previous day, are up by as much as 0.4% for the week. "Escalating US-Iran tensions have disrupted market patterns as uncertainty is weighing on investor sentiment," said Shrikant Chouhan, head of equity research, Kotak Securities.

Brent April crude futures held above the $71 mark on Friday evening, as fears of a potential US military strike on Iran drove prices higher. The latest fillip for oil prices came after US President Donald Trump said the world will find out over the next 10 days whether Washington will reach a deal with Iran or take military action. The two sparring countries have been in talks to resolve the nuclear dispute.

Elsewhere in Asia, Japan and Hong Kong fell 1.1% each, while South Korea gained 2.3%. China and Taiwan markets remained shut for the Lunar New Year. The pan-Europe index Stoxx 600 was up 0.5% at the time of going to print.

At home, the stock indices are stuck in a range, said analysts.

"Over the past three to four months, the Nifty has largely traded within a 1,000-point range, reflecting a phase of consolidation," said Rohan Shah, technical analyst at Asit C Mehta Investment Intermediates. "Sellers emerge as the index approaches the 26,000 mark, while buying interest is seen near 25,000."

The broader market mirrored the cautious tone, with performance remaining a mixed bag. The Nifty Midcap 150 gained 0.5%, while the Nifty Small-cap 250 fell 0.2%. On the BSE, the breadth remained weak with 1,917 shares advancing against 2,265 declines.

Despite the macro-heavy clouds, some fund managers see a silver lining in the valuation churn. Ketan Gujrathi, fund manager-Equity at Quantum AMC, said while delayed US rate cuts and higher crude prices remain hurdles, foreign Institutional Investors (FIIs) have subtly shifted their stance.

"FIIs have turned marginal buyers this month, moving from a bearish stance to a more neutral outlook," Gujrathi said. Foreign portfolio investors net sold shares worth '935 crore. Domestic institutions were buyers to the tune of '2,637 crore. So far in February, overseas investors have remained net buyers worth '13,243 crore.

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