Sensex, Nifty Open Higher But Gains Remain Capped As Crude Oil, Geopolitical Risks Weigh

Indian equities opened in positive territory on Monday but gave up most of their early gains as caution over potential new US sanctions on Iran and elevated crude prices kept sentiment fragile. The 30-share Sensex opened 89 points higher and rose as much as 249 points in early trade, while the Nifty opened 33 points up and climbed 61 points. By around 10:30 am, the Sensex was trading 86 points higher and the Nifty 25 points up, before both indices lost most of those gains by about 11am.

Early Gains Fade

The Sensex initially added more than 200 points in early trade, supported by buying in large IT and banking names, before swinging between an intraday high roughly 250 points above Friday's close and a low about 70 points below it. The Nifty followed a similar pattern, moving from an early rise of around 60 points to sit roughly 25 points down on the day. Domestic equities eventually closed mixed, with the Nifty declining 0.1%.

IT stocks, which had dropped sharply last week, turned higher again, helped by overnight gains on Wall Street and expectations that a softer US interest-rate path would support tech spending. Tata Steel, Infosys, HCL Technologies, Sun Pharma, and Tech Mahindra were among the notable gainers on the Sensex. Infosys rose 1.85%, HCL Technologies gained 1.14%, and Tata Steel advanced 1.12%. HDFC Bank, Tech Mahindra, and TCS also traded higher. IndiGo, Kotak Mahindra Bank, ICICI Bank, Hindustan Unilever, UltraTech Cement, and NTPC were among other gainers.

On the downside, Asian Paints led the laggards, declining 0.42%, followed by Titan, BEL, Adani Ports, and Bharti Airtel. Bharat Electronics, Power Grid, Adani Ports, Axis Bank, Bajaj Finserv, and ITC were the main losers on the Sensex.

Broader Market and Sectoral Moves

The broader market began mostly higher, with the Nifty Smallcap 100 gaining 0.69%, while the Midcap 50 and Midcap 100 rose 0.11% and 0.10%, respectively. Mid-caps and small-caps outperformed the benchmarks. Sectoral performance remained mixed, with private banks, realty, and financial services gaining, while FMCG, auto, media, and IT sectoral indices faced pressure despite gains in several major IT stocks. Earlier in the session, the IT index was up about 0.8%.

India VIX, which measures market volatility, climbed more than 4%, signalling increased volatility. Another report said India VIX rose 3% to settle at 11.52 levels.

Crude Oil and Geopolitical Concerns

Crude oil remained a major concern. Brent crude was around $93.13 a barrel, while WTI stood at $85.69. Global crude benchmarks were hovering near $93 a barrel, down modestly on the day, reigniting concerns about imported inflation and the current account deficit. Elevated oil prices, coupled with geopolitical uncertainty, could limit the market's ability to sustain a sharp rally.

The United States is set to announce fresh economic sanctions on Iran, which may impact the potential supply of crude from the West Asian region. The US Treasury Secretary is scheduled to outline the measures later on Monday. Investors and analysts have been closely watching for more details on possible tougher sanctions against Iran.

Flows and Rupee

Foreign institutional investors sold more than ₹540 crore of equities on Friday, adding to the cautious mood. On Monday, foreign portfolio investors net sold shares worth Rs 1,182 crore, while domestic institutional investors were net buyers at Rs 2,493 crore. The rupee pared initial gains and settled for the day lower by 3 paise at 95.74 (provisional) against the US dollar.

Outlook

Analysts say Indian equities are expected to remain lacklustre amid mixed global cues and a lack of domestic triggers. Going into Tuesday, the market is likely to remain highly volatile as traders adjust positions based on new US sanctions measures on Iran and Iran's possible response. This high-stakes event will coincide with the NSE monthly F&O expiry. Support for the Nifty is placed at 24,200/24,000, while 24,350 might act as a crucial resistance level, above which the Nifty could witness a meaningful rally.

The US Federal Reserve chair's speech at Jackson Hole is scheduled later this week, which could also influence market sentiment.