Asian markets tumble as crude oil stays above $105; Gift Nifty hints at positive opening, inflation adds to RBI rate hike fears
Asian stock markets came under heavy selling pressure on Tuesday as elevated crude oil prices, rising inflation and uncertainty over interest rates weighed on investor sentiment. Indian equities, however, are expected to open marginally higher, going by early indications from Gift Nifty.
Crude oil prices retreated from Monday's highs of more than $107 a barrel, but Brent continued to trade above $105, offering little relief to oil-importing economies such as India. Meanwhile, India's retail inflation climbed to 5.54% in September, strengthening expectations of another interest rate increase by the Reserve Bank of India.
The rupee's sharp appreciation following RBI intervention has brought fresh challenges for banks and financial markets. Measures aimed at stabilising the currency are expected to tighten liquidity, raise foreign exchange transaction costs and affect banking profitability.
Gift Nifty closed at 22,423.50 on Monday night. It slipped to around 22,394 in early trading on Tuesday before recovering slightly, indicating a cautiously positive opening for Indian equities.
India's retail inflation accelerated to 5.54% in September from 4.83% in August, largely driven by rising food prices. Food inflation climbed to 7.74%, according to official data released on Monday.
The September reading was the highest under the revised Consumer Price Index series and moved closer to the RBI's upper tolerance limit of 6%. Rural inflation reached 6.08%, compared with 4.88% in urban areas.
Rising food prices, transport costs and expensive crude oil have increased pressure on households and businesses. The latest inflation figures have also strengthened expectations that the RBI could raise its benchmark repo rate again in December.
The central bank raised the repo rate by 25 basis points to 5.50% earlier this month. Economists now expect further monetary tightening if inflation remains elevated.
US inflation data, due on Wednesday, will also be closely watched. The figures could influence expectations surrounding the Federal Reserve's remaining interest rate decisions this year.
The RBI's measures to support the rupee helped the currency appreciate by nearly 1% on Monday. However, the intervention has raised concerns over tighter liquidity and reduced profitability for financial institutions.
Under the revised requirements described by market participants, banks may have to maintain at least ₹80,000 crore in additional reserves. The resulting financial impact could approach ₹5,000 crore.
Stricter conditions on speculative foreign exchange positions are also expected to reduce derivatives trading activity, potentially affecting revenue at banks and other financial intermediaries.
The currency market witnessed considerable volatility on Monday, with the dollar moving through a range of around 40 paise during trading. The RBI reportedly intervened through dollar sales to support the rupee.
Despite the appreciation, market participants remain concerned that continued selling by foreign portfolio investors could put renewed pressure on the currency. Some expect the dollar to move back above ₹96 in the coming sessions.
US equities ended Monday's session on a mixed note as investors positioned themselves for the third-quarter corporate earnings season.
The Dow Jones Industrial Average advanced on expectations of strong results from major banks, while weakness in semiconductor stocks dragged the Nasdaq Composite lower.
JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo are scheduled to announce their quarterly results on Tuesday. Analysts expect double-digit profit growth at several major lenders.
Research firm FactSet expects companies in the S&P 500 index to report aggregate third-quarter earnings growth of 29.6%.
Dow Jones: 51,850.55, up 195.60 points (+0.38%)
S&P 500: 7,807.24, down 4.30 points (-0.06%)
Nasdaq Composite: 27,245.90, down 120.27 points (-0.44%)
US stock futures were also mixed in early Tuesday trading. Dow futures gained 84 points, or 0.16%, while S&P 500 futures declined 10 points, or 0.13%. Nasdaq futures fell 178 points, or 0.58%.
Indian companies listed through American Depository Receipts (ADRs) recorded largely positive performances in New York on Monday.
HDFC Bank: Up 1.35% during regular trading; after-hours price $22.60, up 0.09%
ICICI Bank: Up 0.57% during regular trading; after-hours price unchanged at $28.05
Infosys: Up 0.93% during regular trading; after-hours price unchanged at $10.83
Wipro: Flat during regular trading; after-hours price $1.711, up 0.65%
European stock markets advanced on Monday, supported by expectations of healthy quarterly earnings from banks and automobile manufacturers.
However, semiconductor stocks remained under pressure, reflecting the weakness seen in technology shares elsewhere.
Major Asian equity markets traded sharply lower on Tuesday as investors reacted to expensive crude oil and global economic uncertainty.
South Korea's Kospi suffered the biggest decline among major regional indices, falling around 6%. Japan's Nikkei dropped 2.40% when trading resumed after a holiday.
Asian markets, early October 13
South Korea, Kospi: -6.00%
Japan, Nikkei: -2.40%
Taiwan: -1.70%
Shanghai Composite: -1.15%
Australia: -0.50%
Hong Kong, Hang Seng: -0.40%
The broad decline reflected concerns that sustained high energy prices could fuel inflation, reduce corporate margins and delay monetary easing across major economies.
Indian equities suffered another setback on Monday, reversing early gains as investors assessed the combined impact of higher crude oil prices and the RBI's currency market measures.
The market began the session hoping to extend Friday's relief rally. However, selling pressure intensified during trading, briefly pushing the benchmark indices down by around 1%. A late recovery during the closing auction helped limit losses.
The Sensex declined 547.65 points, or 0.76%, to close at 71,924.68. The Nifty 50 fell 157.10 points, or 0.70%, to 22,363.35.
Banking, technology and FMCG stocks were among the major laggards, while some automobile and real estate stocks showed relative resilience.
Broader indices performed better. The Nifty Midcap 100 gained 0.08%, while the Nifty Smallcap 100 advanced 1.42%.
Indian market closing levels, October 12
Sensex: 71,924.68, down 547.65 points (-0.76%)
Nifty 50: 22,363.35, down 157.10 points (-0.70%)
Bank Nifty: 54,918.00, down 338.65 points (-0.61%)
Nifty Midcap 100: 58,834.55, up 47.25 points (+0.08%)
Nifty Smallcap 100: 19,425.80, up 272.10 points (+1.42%)
Market breadth remained almost evenly balanced. On the BSE, 2,219 stocks advanced while 2,259 declined. On the NSE, 1,786 stocks gained against 1,788 that ended lower.
Foreign institutional investors reduced the pace of selling but remained net sellers. They sold equities worth ₹1,708.48 crore in the cash market. Domestic institutional investors, meanwhile, made net purchases of ₹3,045.02 crore.
RBL Bank: The private sector lender reported a 170% increase in second-quarter net profit to ₹482 crore. Net interest income rose 37.4%, while the net non-performing asset ratio declined to 0.29%.
HCLTech: The IT company's second-quarter revenue grew 2.6% in rupee terms and 2.2% in dollar terms. Its operating profit margin improved by 1.31 percentage points.
The company revised its revenue growth guidance for the current financial year to 2.5-4%, while services revenue growth is expected to remain in the 3-4% range.
Gold prices fell on Monday as the US dollar strengthened and expectations of another Federal Reserve interest rate increase weighed on precious metals.
Spot gold ended Monday at $4,172.80 an ounce, down $22.80, or 0.54%. Prices slipped further to around $4,156 in early Tuesday trading.
In Kerala, the price of 22-carat gold fell by ₹1,280 per sovereign on Monday to ₹1,09,760.
Silver also weakened, dropping nearly 1% to close at $60.45 an ounce. It declined further to around $60 in early trading.
Precious metal prices
Gold: $4,156 an ounce, early Tuesday
Kerala gold: ₹1,09,760 per sovereign, Monday
Silver: $60 an ounce
Platinum: $1,674 an ounce
Palladium: $1,119 an ounce
Rhodium: $8,775 an ounce
Natural rubber prices continued to rise in both international and domestic markets on Monday.
In Bangkok, RSS-1 rubber reached $296.30 per quintal, while RSS-3 traded at $292.90 per quintal.
In Kerala, RSS-4 rubber increased to ₹28,450 per quintal, offering support to growers amid the recent fluctuations in commodity markets.
Copper prices moved close to their all-time high as supply disruptions in Chile and stronger demand from China supported the market.
Snowfall and other operational problems reportedly forced some Chilean mines to suspend production, tightening global supplies.
Copper rose 0.90% on Monday to $14,821.35 a tonne, approaching its record level of $14,851.
Aluminium declined 0.42% to $3,057.06 a tonne. Zinc, lead, nickel and tin also traded lower.
Agricultural commodities recorded modest gains on Monday.
Cocoa prices increased to $5,676 a tonne, while Arabica coffee rose 1.03% to $2.899 a pound.
Palm oil gained 0.98% to 4,637 Malaysian ringgit a tonne.
The US dollar index strengthened sharply on Monday, closing at 102.59. It subsequently eased to around 102.49 in early Tuesday trading.
The euro traded at $1.1157, while the British pound stood at $1.3207.
The Japanese yen weakened to 158.48 against the dollar. The Chinese yuan traded around 6.69 per dollar.
The yield on the benchmark 10-year US Treasury bond eased to 5.227% in early trading on Tuesday. Nevertheless, elevated bond yields continued to weigh on the outlook for equities and other risk assets.
The Indian rupee recorded a sharp recovery on Monday following the RBI's currency market measures.
The dollar declined by 96 paise to close at ₹95.77, marking an appreciation of nearly 1% for the rupee.
In the offshore forward market, the dollar traded around ₹95.67 early Tuesday.
The Chinese yuan declined to ₹14.31, while the euro weakened to ₹106.86 against the rupee.
Despite the recovery, sustained foreign portfolio outflows and high crude oil prices remain important risks for the Indian currency.
Crude oil prices retreated on Tuesday after rising sharply in the previous session.
Brent crude had climbed above $107 a barrel during Monday's trading before settling at $106.65, a gain of approximately 2%.
In early Tuesday trading, Brent eased to $105.57 a barrel, while US West Texas Intermediate crude traded around $92.76.
The continued strength in crude oil prices remains a major concern for India because the country depends heavily on imported oil.
Elevated prices could widen the import bill, increase inflationary pressure and affect corporate profitability, particularly in sectors dependent on fuel and petroleum-based inputs.
Major cryptocurrencies resumed their decline on Tuesday amid weaker investor appetite for riskier assets.
Bitcoin slipped below $81,360, while Ethereum fell beneath $2,420. Solana traded below $103.
The weakness reflected broader risk aversion across global financial markets.
(Monday, October 12)
Indicator, closing value and change
Sensex: 71,924.68, -0.76%
Nifty 50: 22,363.35, -0.70%
Bank Nifty: 54,918.00, -0.61%
Nifty Midcap 100: 58,834.55, +0.08%
Nifty Smallcap 100: 19,425.80, +1.42%
Dow Jones: 51,850.55, +0.38%
S&P 500: 7,807.24, -0.06%
Nasdaq Composite: 27,245.90, -0.44%
US dollar: ₹95.77, down ₹0.96
Gold (international): $4,172.80 an ounce, down $22.80
Gold (Kerala): ₹1,09,760 per sovereign, down ₹1,280
Brent crude: $106.65 a barrel, up $1.93
Indian investors will closely monitor crude oil prices, movements in the rupee, foreign institutional investment flows and developments in Asian markets.
September's higher-than-expected inflation reading has added another concern, with markets increasingly expecting the RBI to maintain a tighter monetary policy stance.
Corporate earnings, particularly from banks and technology companies, will also influence sentiment.
Although Gift Nifty indicates a marginally positive opening, the combination of expensive crude oil, global equity weakness and continued foreign investor selling could keep Indian markets volatile through Tuesday's session.