Benchmark indices are likely to open slightly higher on Wednesday, with easing crude oil prices and softer US rate-hike expectations offering some relief after the recent sell-off. However, uncertainty over the US-Iran conflict and heavy foreign investor selling could keep gains in check.
GIFT Nifty futures were at 22,834 as of 7:46 am, signalling a positive start for the Nifty 50, which closed at 22,716.20 on Tuesday.
The market is coming off a volatile session, with the Nifty recovering from below 22,600 to end just above the 22,700 mark. The benchmark has fallen around 5.8% in September so far and is heading for its worst monthly performance since March.
CRUDE OIL, US RATES IN FOCUS
Brent crude futures rose 1.1% to $103.70 a barrel after falling 2.6% in the previous session.
Signs of recovering exports from the Middle East have helped ease some concerns over oil supply, although the lack of a peace deal between the US and Iran remains a key risk for markets.
The US 2-year Treasury yield also eased as traders reduced expectations of an October rate hike after a Federal Reserve official said the central bank has time to assess incoming economic data before deciding on further rate action.
FII SELLING REMAINS A BIG CONCERN
Foreign investors remained heavy sellers of Indian equities. They sold shares worth Rs 9,980.22 crore on Tuesday, their biggest daily outflow in about four months.
Foreign investors have now sold around $2.7 billion worth of Indian shares in September, taking their year-to-date selling to $26.75 billion.
This remains a major overhang for the market even as lower crude prices and softer US rate expectations offer some support.
NIFTY LEVELS TO WATCH
Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, said the Nifty’s recent candle pattern continues to signal a downward bias, although the index could see a pullback from lower levels as technical indicators approach oversold territory.
He said 22,400 is an important support level, while a move above 22,800 could take the index towards 23,000.
“A move above 22,800 will signal a pullback towards the 23,000 levels,” Mukherjee said. However, he added that a meaningful trend reversal would require the index to reclaim the 23,000-23,100 zone.
Wednesday will also see changes to the Nifty 50 as part of the NSE’s semi-annual index review. BSE-listed IT company Wipro will replace BSE in the Nifty as part of the review.
The changes are being closely watched as passive funds with around $97 billion in assets under management track the index. Investors will also monitor whether the closing auction can absorb the higher flows linked to the rejig.
