Geopolitical tension from a surprise Hamas attack on Israel caused the opening losses in Indian benchmark indices, Nifty and Sensex, on Monday.
Market on Monday:
Indian equities declined on Monday, influenced by concerns over rising US interest rates in the wake of robust jobs data and surging oil prices due to ongoing West Asian military conflicts, with both NSE Nifty 50 and S&P BSE Sensex experiencing a 0.5% decrease. Except for the IT sector, which remained steady, all 12 major sectoral indices recorded losses. High-weightage banks and oil & gas sectors dropped by 1%, while public sector banks, metals, and media stocks fell over 2%. Smaller domestic-focused companies, including small- and mid-caps, also experienced losses exceeding 1.5%. Crude oil futures, on the other hand, gained ground on Monday morning due to the Hamas attack on Israel and the subsequent military conflict.
Effect of Israel’s war on crude oil:
Last week, crude oil prices saw a 9% decline from their annual peak, primarily driven by OPEC’s proposal to maintain existing output cuts during its meeting on October 5th. Presently, Brent crude is trading at $86.29 per barrel. However, there is growing concern about an extended and widening conflict, as industry experts have raised the potential involvement of a state actor in the highly coordinated and unprecedented attacks on Israel.
The potential for an oil price surge may stem from hedge funds with substantial short positions engaging in short-covering.
Additionally, actual users and hedgers were collectively net short by 26.6 million barrels, while the category labeled as “others” held long positions amounting to 72.6 million barrels, according to data from the US derivatives regulator, the Commodity Futures Trading Commission.
What should you do in the current situation?
- Critical Demand Zone: The 19300–19250 range is identified as a critical demand zone. In technical analysis, a demand zone is an area where buying interest is expected to be strong, potentially providing support for the price. Traders often look for such zones to make decisions.
- Sideways Pattern: The market will stay sideways if it stabilizes between 19300–19250. A sideways pattern implies that the price is consolidating and not making significant upward or downward movements.
- Obstacle at 19800: There is a notable obstacle or resistance level at 19800. Resistance levels are where selling pressure makes it hard for prices to move higher, indicating potential reversals or stalls.
- Potential Correction: A breach below 19250 in the Nifty may trigger a healthy correction, potentially reaching the 18800 level. A correction is a price movement that goes against the prevailing trend, in this case, a downward movement.
- Caution for Short-Term Traders: Short-term traders are advised to exercise caution and not rush into trades, possibly due to the uncertainty associated with the market’s current position within the range and the potential for a correction.
Buying Opportunity for Long-Term Investors: Long-term investors are suggested to view a substantial correction as an excellent buying opportunity. If Nifty falls, long-term investors could buy at lower prices, expecting future growth opportunities.
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