Stock markets are set for a cautious start on Friday after the Sensex and Nifty suffered their steepest single-session fall in 10 weeks in the previous session.
While early indicators point to a flat opening, elevated crude oil prices, high global bond yields and continued pressure on financial stocks could keep investors cautious.
GIFT Nifty was around 23,094 points at 8:15 am, indicating a marginally higher start for the Nifty 50, which closed at 23,063.10 on Thursday. Other early market indicators also pointed to a flat-to-mildly positive opening.
The key question for Dalal Street on Friday is whether Thursday’s 1.6% sell-off was a one-day correction or the start of another leg of weakness.
The Sensex plunged 1,247.71 points, or 1.67%, to close at 73,580.54 on Thursday, while the Nifty fell 383.70 points, or 1.64%, to 23,063.10.
The sell-off was broad-based. All 16 major sectoral indices ended lower, while the Nifty Midcap 50 fell 2.57%, Midcap 100 declined 2.25% and Smallcap 100 dropped 1.53%.
Financial stocks were at the centre of the selling after IRDAI’s proposed changes to insurance commission structures raised concerns about the impact on insurers, banks, NBFCs and insurance distributors.
PB Fintech was among the biggest casualties, plunging 36% on Thursday.
IRDAI COMMISSION REFORM REMAINS A KEY RISK
The proposed insurance commission reforms are likely to remain a major focus on Friday.
Investors are assessing how lower or restructured commissions could affect the earnings of insurance distributors and financial institutions that earn fee income from insurance businesses.
The impact was particularly visible in financial stocks on Thursday, with the Nifty Financial Services Ex-Bank index falling 4.35% and the Nifty MidSmall Financial Services index dropping 4.37%.
PB Fintech’s management has also warned that the proposed commission caps could severely affect its non-life insurance business, potentially leading to lower spending and slower hiring.
This means financial stocks could remain volatile even if the broader market gets some relief from a positive opening.
CRUDE OIL IS THE BIGGEST GLOBAL HEADWIND
Oil remains another major concern.
Brent crude was around $105.85 a barrel early Friday, after surging sharply on Thursday. WTI was around $93.80.
For India, sustained crude prices above $100 are particularly important because the country is heavily dependent on imported oil. Higher crude can increase the import bill, put pressure on inflation and the rupee, and raise concerns about corporate margins.
There is, however, one potential positive. Reports of discussions between Washington and Tehran on a possible phased route towards ending the conflict have raised hopes of a reopening of the Strait of Hormuz. Any credible progress on this front could bring oil prices down and ease some pressure on Indian equities.
HIGH BOND YIELDS COULD LIMIT ANY RECOVERY
The other major concern is the global bond market.
Higher US Treasury yields are keeping pressure on equity valuations and raising concerns about the global interest-rate outlook. Reuters reported that elevated oil prices had pushed US 30-year bond yields to their highest level in more than 20 years.
This creates a difficult backdrop for emerging markets such as India, particularly after foreign investors sold Indian equities worth Rs 5,027.36 crore on Thursday.
Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking, said the Nifty formed a “sizable bearish candle with a lower high and a lower low” on the daily chart and closed below last week’s low of 23,116.
He said the index could face further pressure if it remains below the 23,281-23,350 gap area created on Thursday.
According to Mukherjee, the 22,700-22,800 zone is the next key support area, while 23,500-23,600 could act as resistance.
WILL THE MARKET CRASH AGAIN TODAY?
The early signals do not point to another sharp fall at the open. GIFT Nifty is indicating a mildly positive start, while some global markets are showing signs of stability.
However, that does not remove the risks that triggered Thursday’s sell-off.
If crude remains above $105, global bond yields stay elevated and financial stocks continue to face selling because of the IRDAI proposal, the recovery could remain limited. On the other hand, a sustained fall in crude or meaningful progress in US-Iran talks could help markets stabilise after Thursday’s sharp correction.
So, rather than assuming another “crash”, Friday’s session is likely to be watched for whether the market can hold above Thursday’s closing levels and whether financial stocks show signs of stabilising. The combination of oil, bond yields and the IRDAI reform remains the key test for sentiment.
