Brent crude falls to lowest level since August; will markets extend recovery?

Brent crude prices fell to their lowest level since late August on Tuesday after US President Donald Trump said the war involving Iran was "effectively over" and played down the need for further military action against Tehran "at this point".

Brent crude, the global oil benchmark, fell 3.02 per cent to $89.55 a barrel on Tuesday afternoon, its lowest level since August 31. The decline followed a nearly 6 per cent fall on Monday as signs of a possible de-escalation in the conflict weighed on prices.

The movement in oil prices comes amid political developments in the US, where President Trump's Republicans suffered setbacks in the mid-term election results as Democrats made gains.

For India, one of the world's largest crude oil importers, lower oil prices offer some relief by potentially reducing the country's import expenditure and easing inflationary pressures.

The Indian rupee, meanwhile, traded below the 94-mark against the US dollar, strengthening from its record low of 96.96 touched in May this year.

Both crude oil prices and the rupee remain important variables for domestic equities. Lower crude prices can ease input costs for several industries, particularly those with significant energy and raw material expenses, while currency movements can affect the cost structures and earnings of companies with substantial import or export exposure.

Foreign institutional investors (FIIs) have also returned to buying Indian equities so far in November, following significant selling in September and October.

What's next for markets?

Ajit Mishra, SVP (Research) at Religare Broking, believes some consolidation would be healthy for markets after its recent sharp rally.

"Nifty's ability to sustain above the 24,600–24,800 zone will be important to preserve the positive bias and pave the way for a potential move towards 25,200–25,600. We recommend using any further consolidation to selectively accumulate quality stocks, with a focus on banking, pharma, auto, infrastructure and capital markets themes," he stated.

Indian equity markets maintained their positive momentum on Monday, with benchmark indices absorbing early profit-booking after a gap-up opening and closing higher.

Ponmudi R, CEO of Enrich Money, said, "The market's ability to hold ground after last week's extraordinary rally, rather than succumbing to sharp profit-booking, reflected continued investor confidence, supported by sustained foreign institutional buying, relatively stable crude oil prices, and a firm rupee."

Indian equity benchmarks and foreign exchange markets remained shut on Tuesday on account of Diwali Balipratipada.