Domestic markets are expected to open on negative note on Monday due to geopolitical tension in Israel. GIFT Nifty at 19646 indicates that Nifty may open down, as Nifty futures on Friday closed at 19678.50. Analysts expect foreign portfolio investors escalate their selling in emerging markets, including India, which is already seeing their selling. 

During the next week, Indian equities expected to remain focused on momentum of bond and forex markets. Higher volatility expected to be seen with sector specific momentum during the week. The attack on Israel by Palestine will certainly impact risk sentiment when markets open on Monday. The extent of the impact will depend on the extent of escalation, said IFA Global.

“If other Arab nations get involved and lend their support to Palestine, the escalation could be significant and could have serious consequences as far as crude supply is concerned. A spike in crude prices seems imminent in a knee jerk reaction. The development would be negative for equities as well,” it added.

Meanwhile, global markets are mixed in early deal on Monday. Though Israel stocks plunged on Sunday, equities across Asia-Pacific region are mixed with marginal changes only. Analysts said investors are assessing the evolving situation. 

Meanwhile, the focus will be on US treasury yield, which has been on the rise quite significantly.

FPI trends

“The dominant factor impacting capital flows to markets in recent weeks has been the steadily rising US bond yields. Early days of October witnessed a rout in the US bond market which took the 30-year bond yield to 5% briefly. The benchmark 10-year yield is consistently over 4.7% forcing the FPIs to sell in emerging markets, said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

India continues to be on top of emerging economies in attracting FPI this year but September witnessed selling and October has begun with the same trend. In the first four days of October, FPIs have sold stocks for Rs 9412 crores in the cash market, he added.

Short covering in Nifty

The Future Open Interest (OI) indicated covering of short positions in Nifty futures, said Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities. Strong put writing was observed in 19,500 & 19,600 Strikes today, which led to a strong up move in Nifty on Friday.

“Nifty has given a consecutive higher close on the daily chart, indicating a trend reversal. The Index has also closed above the 50-Day Exponential Moving Average of 19,559 today. Nifty touched the 38.2% Fibonacci retracement level of 19,673, drawn from the high of 20,222 made on 15th September to the low of 19,334 made on 4th October. The support for Nifty shifts to 19,600 after a strong closing on Friday, he added..

Bank Nifty swung both ways in a day that was marred by volatility as the RBI decided to keep the rates unchanged for the fourth consecutive time. Bank Nifty has formed back-to-back doji candles on the daily chart, indicating indecision, he further said.v

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