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Gift Nifty Rises 81 Points, Signals Gap-Up Opening As Oil Prices Ease on Strait of Hormuz Hopes
Crude oil prices fall around 2% in early trade on Wednesday, after Iran says it has resumed talks with Oman on managing traffic through Strait of Hormuz, a key global energy route.
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The Gift Nifty pointed to a stronger opening for Indian equities on Wednesday, August 26, as falling crude oil prices and easing concerns around the Strait of Hormuz improved global market sentiment. Gift Nifty was trading at 24,561, up 81 points or 0.33%, as of 7:46 am on Wednesday. The futures indicator was above the Nifty 50’s previous close of 24,334, signalling a likely gap-up opening for the domestic market.
It comes after crude oil prices fell around 2% in early trade on Wednesday. Brent crude was down 2% at $86.80 a barrel, while US West Texas Intermediate (WTI) crude fell 1.8% to $80.87. Both benchmarks had declined more than 3% on Tuesday.
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The latest fall in oil prices came after Iran said it had resumed talks with Oman on managing traffic through the Strait of Hormuz, a key global energy route.
Iran and Oman said on Tuesday that they had discussed “a joint temporary navigational corridor” through the strait and agreed to clear the waterway of mines.
The Strait of Hormuz is particularly important for global energy markets as it handled around one-fifth of global oil and liquefied natural gas shipments before the war began in February.
The developments have raised hopes that the risk of a prolonged disruption to oil supplies could ease. However, tensions remain high. An oil tanker was struck by an unidentified projectile on Tuesday near the entrance to the strait, according to the United Kingdom Maritime Trade Operations.
The US has also started sending personnel back to some diplomatic missions in the Middle East that had earlier been evacuated or downsized amid tensions with Iran. The move suggests Washington sees a lower risk of further escalation in the near term, although some embassies will initially operate below full capacity.
What market experts are saying
Ponmudi R, CEO of Enrich Money, said the combination of lower crude prices, softer US Treasury yields and a rebound in Wall Street markets has improved the backdrop for Indian equities.
“Indian equity markets are poised for a stronger start on Wednesday as a sharp decline in crude oil prices and a pullback in U.S. Treasury yields improve the backdrop for risk assets,” Ponmudi said.
He added that GIFT Nifty’s move above 24,500 was pointing towards a gap-up opening, while falling crude prices could provide relief to Indian markets after weeks of concerns over oil-driven inflation.
“Crude oil has emerged as the key positive catalyst. WTI has fallen more than 6% over the past two sessions to trade in the $80–81-per-barrel range,” he said.
For India, lower crude prices are generally positive because the country imports a large share of its oil requirement. A sustained decline in oil prices can ease pressure on inflation, the current account and corporate costs.
Asian markets mixed
Asian markets were mixed in early trade on Wednesday. Japan’s Nikkei 225 was down around 0.3%, while South Korea’s Kospi was up about 0.4%. The mixed regional trend suggests that investors remain cautious despite the improvement in the global risk mood.
Nifty outlook
On the technical front, Ponmudi said the Nifty’s recovery has improved its near-term outlook, but the index needs to hold key levels for the gains to continue. “Nifty 50 is likely to maintain a constructive bias following Tuesday’s recovery, with the index successfully reclaiming the 24,300 zone, which also coincides with the 20-day EMA,” he said.
According to him, a sustained move above 24,400 could strengthen the recovery and take the index towards 24,500-24,600. On the downside, 24,200 is the immediate support level, followed by the 24,100-24,000 zone.
“Overall, the near-term technical outlook has improved but remains cautious,” Ponmudi said. “Nifty 50 will need to decisively sustain above 24,400 to establish stronger bullish momentum, while failure to hold above 24,200 could weaken the recovery structure.”
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Ask News18A sustained decline in oil prices could ease pressure on India’s inflation.
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Original source: https://www.news18.com/business/markets/
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