Sensex, Nifty outlook as oil weighs, FPI March selloff hits Rs 34,000 crore

Risk-off sentiment globally, amid a reversal in crude oil prices, was reflected in the fear gauge India VIX, which soared 11 per cent on Wednesday, as equity benchmarks marked seventh session of decline in the past 10.

The recent fall in crude oil prices reversed after a post by US Energy Secretary Chris Wright, suggesting the US Navy escorted an oil tanker through the Strait of Hormuz to ensure oil supplies, was deleted. Brent futures for May delivery were trading at $89.50 a barrel after testing $81.16 level in the preceding session. Rupee also tested 92 mark against the dollar, raising fears of further foreign outflows 

Mixed signals on Iran war There were fears the Iran war may not be ending as soon, as suggested by the US President Donald Trump earlier. 

"At the time of writing there was lack of clarity on the direction ahead, amidst mixed messages on the duration and intensity of the conflict," said Radhika Rao, Senior Economist and Executive Director at DBS Bank. 

Rao said India’s VIX gauge remained at elevated levels, even if off highs, underscoring weak underlying risk sentiments. 

Valuation turns reasonable Rahul Singh, Chief Investment Officer – Equities at Tata Asset Management said the geopolitical developments in West Asia have led to an increase in the risk premium for Indian equities, largely driven by concerns around crude prices and their potential impact on the rupee. 

"However, valuations have become more reasonable with the Nifty trading around 20 times earnings. While near-term sentiment may remain sensitive to global developments, sectors such as consumer and pharmaceuticals could remain relatively insulated, while metals and energy may benefit from higher commodity prices," he said.

Vinod Nair, Head of Research at Geojit Investments said weak global cues and the ongoing US–Iran conflict kept risk-off sentiment elevated. "Concerns over rising inflation stemming from potential energy supply disruptions and rationing prompted investors to book profits, while continued FII outflows further added to market pressure," he said.

Data showed FPI outflows stood at Rs 39,417 crore in March so far. India VIX jumped 11.41 per cent to 21.06, as Sensex plunged 1,342.27 points or 1.72 per cent to 76,863.71. Nifty closed the day at 23,866.85, down 394.75 points or 1.63 per cent. 

Technical charts still weak Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities said Nifty has failed to sustain its recent pullback attempt and ended with yet another lower close, highlighting the continued dominance of bears over bulls.

"Momentum indicators further support the negative bias. The RSI remains in a falling trajectory and is currently placed near 30, reflecting weak momentum. Meanwhile, a rising ADX signals strengthening bearish trend intensity, and the MACD remains well below the zero line, reinforcing the prevailing downside bias," Shah said.

Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities said the near-term trend of Nifty seems to have reversed down after a reasonable bounce back. As per the negative chart pattern like lower top lower low, Nifty is expected to slide below the recent swing low of 23,697 in the short term. Immediate resistance is placed at 24,050 level, he said.

On Sensex,  Shrikant Chouhan, Head Equity Research at Kotak Securities said as long as the Sensex is trading below 77,500, weak sentiment is likely to continue. 

"On the lower side, the market may retest the level of 76,300. Further downside could continue, dragging the market till 76,000-75,800. On the flip side, above 77,500, a pullback move could extend up to 78,000," he said.