Indian equities are expected to open relatively unchanged on Tuesday following remarks by Federal Reserve Chair Jerome Powell, who indicated no rush for further interest rate cuts.
Market activity might be subdued as investors prepare for a market holiday on Wednesday in observance of Gandhi Jayanti. Additionally, market participants will be reacting to outcomes from a SEBI meeting, an array of economic data, and escalating tensions in the Middle East.
The Securities and Exchange Board of India (SEBI) has approved a new asset class designed for risk-oriented investors and endorsed the liberalized Mutual Funds Lite (MF Lite) framework, which focuses on passively managed schemes.
In terms of economic data, reports indicate that India's infrastructure output contracted for the first time in over three years in August, and the current account deficit expanded to $9.7 billion in Q1 of 2024-25. Conversely, the country's fiscal deficit for the April-August period of the current financial year narrowed compared to the same period last year.
Geopolitically, the Israeli military has initiated a "limited, localized" operation against Hezbollah targets in southern Lebanon, raising concerns over regional stability.
On Monday, benchmark indexes Sensex and Nifty plunged approximately 1.5 percent and 1.4 percent, respectively, while the rupee depreciated by 9 paise to close at 83.79 against the dollar. This decline came amid concerns that a potential increase in Yen interest rates could reduce cross-country investments in equity.
Asian markets showed mixed performance, with Chinese and Hong Kong markets closed for holidays. Japan's Nikkei surged nearly 1.5 percent after a 4.8 percent drop on Monday.
Oil prices remained steady, and gold hovered just below a recent record high as investors anticipated the release of U.S. labor data later in the week, seeking clarity on the pace of U.S. rate cuts.
U.S. stocks lacked clear direction before closing higher overnight amid optimism that the economy is headed for a soft landing and expectations of continued rate cuts from the Fed. The Dow finished marginally higher, and the S&P 500 climbed 0.4 percent to achieve record closing highs. Fed Chair Jerome Powell stated that the economy remains on solid ground and hinted that two additional quarter-percentage-point rate cuts are possible this year, though the rate trajectory is not set in stone.
The tech-heavy Nasdaq Composite also advanced 0.4 percent, extending its winning streak to two consecutive months.
European stocks fell on Monday following profit warnings from auto giants Stellantis and Volkswagen. The pan-European STOXX 600 dropped 1 percent, while Germany’s DAX declined 0.8 percent. France's CAC 40 lost 2 percent, and the U.K.'s FTSE 100 fell by 1 percent.
