Middle East war, crude prices to steer Dalal Street this week; Fed, inflation data also in focus

File photo Developments in the ongoing Middle East conflict and the movement in crude oil prices will be the key drivers for Indian equity markets this week, analysts said, with investors also closely tracking the US Federal Reserve’s interest rate decision, inflation data and foreign fund flows after a bruising selloff in Dalal Street. Market participants are bracing for another volatile week after Indian benchmarks logged steep losses amid rising oil prices, a weakening rupee and persistent foreign institutional investor (FII) outflows linked to the widening US-Israel-Iran conflict. “This week is packed with several important developments and data releases, both domestically and globally. Geopolitical developments will remain the key factor to watch, as their impact on crude oil prices is likely to influence overall market direction,” Ajit Mishra, SVP, research, Religare Broking Ltd, said, as quoted by news agency PTI. He said investors on the domestic front would watch wholesale price inflation (WPI), balance of trade data and foreign exchange reserves, while globally, attention would be on the US Fed’s rate decision and the Federal Open Market Committee’s economic projections. Crude, Hormuz disruption keep markets on edge Analysts said the Strait of Hormuz will remain the biggest pressure point for markets, as any prolonged disruption to shipping could tighten oil supplies, stoke inflation fears and hurt risk appetite across Asia. “The week ahead is expected to remain highly volatile, with market direction largely influenced by developments surrounding the ongoing conflict in the Middle East,” Ponmudi R, CEO of Enrich Money, said, as per PTI. “Particular focus will remain on the Strait of Hormuz, a critical energy chokepoint, where any prolonged disruption to shipping could tighten global oil supplies, influence inflation expectations across Asia, and keep overall risk sentiment fragile,” he added. The US-Israel-Iran conflict escalated from February 28 and has led to a blockade of the Strait of Hormuz, the main transit route for Gulf energy supplies. Markets reeling after sharp weekly fall The caution comes after a brutal week for Indian equities. The BSE benchmark Sensex plunged 4,354.98 points, or 5.51 per cent, last week, while the NSE Nifty dropped 1,299.35 points, or 5.31 per cent. Since February 27, the 30-share BSE Sensex has slumped 6,723.27 points, or 8.27 per cent. Indian markets ended the week under “significant corrective pressure” as global risk sentiment deteriorated amid rising crude oil prices, escalating geopolitical tensions in Middle East and continued FII selling, Hariprasad K, research analyst and founder, Livelong Wealth. On Friday alone, the Sensex fell 1,470.50 points, or 1.93 per cent, to settle at 74,563.92, while the Nifty dropped 488.05 points, or 2.06 per cent, to 23,151.10. The rupee also weakened to a fresh record low of 92.45 against the US dollar, while Brent crude climbed to $100.7 per barrel. FII flows, global central banks in spotlight Analysts said foreign investor activity and rupee movement will remain crucial indicators in the days ahead, as global capital allocation toward emerging markets like India stays sensitive to geopolitical tensions and commodity volatility. Foreign investors pulled out Rs 52,704 crore (about $5.73 billion) from Indian equities in the first fortnight of March amid Middle East tensions, rupee depreciation and concerns over the impact of elevated crude prices on growth and corporate earnings. Siddhartha Khemka, head of research, wealth management at Motilal Oswal Financial Services, said that investors would also monitor key global data points, including Eurozone CPI, the Fed rate decision, and policy decisions from the Bank of England and European Central Bank, along with US jobs data. With oil hovering near the $100-a-barrel mark and geopolitical uncertainty still high, Dalal Street is likely to remain highly sensitive to every new headline from Middle East this week. End of Article