Manic Monday for Dalal Street? Report claims Iran may attack Israel 'as early as tomorrow'

As tensions escalate in the Middle East, US Central Command’s General Michael Kurilla has rushed to the region, with expectations of an imminent attack by Iran on Israel, possibly as soon as Monday. Kurilla's visit, though pre-planned, is now focused on rallying international and regional support for Israel, similar to the coalition that defended it on April 13, according to an Axios report.

The Pentagon and Centcom have not commented on the situation, but Kurilla is expected to visit Jordan and several Gulf countries.

These geopolitical tensions are casting a shadow over the markets, which have already been jittery. The Nifty 50 recently breached the 25,000 mark but failed to sustain it, closing the week with a slight loss of half a percent. Rising recession fears in the U.S., highlighted by a Manufacturing PMI drop to 49.6 in July and weaker-than-expected job data, have dampened global market sentiment. Significant selling by foreign institutional investors (FIIs) and high valuation concerns also contributed to market instability, though a sharp drop in oil prices helped limit the losses.

Looking ahead, the market is expected to consolidate with a negative bias. Key factors to watch include the Reserve Bank of India’s (RBI) monetary policy, corporate earnings, and oil prices. The BSE Sensex fell by 351 points to close at 80,982, while the Nifty 50 dropped 117 points to 24,718. On a brighter note, the Nifty Midcap 100 index rose by 0.3 percent, though the Smallcap 100 index saw a decline of 0.3 percent.

Vinod Nair, Head of Research at Geojit Financial Services, noted that global economic growth is showing signs of weakness, compounded by escalating trade tensions, conflicts in the Middle East, and persistently high inflation. He believes the chances of further market consolidation are elevated due to premium valuations, weak Q1 results, and ongoing global market consolidation.

In the coming week, several factors could influence the market's direction. The Monetary Policy Committee's meeting, concluding on August 8, is highly anticipated, with experts expecting the repo rate to remain unchanged at 6.5 percent. Market participants will closely monitor the RBI's commentary on interest rate cuts.

Over 900 companies, including Nifty 50 names like Bharti Airtel, Oil and Natural Gas Corporation, Eicher Motors, and Grasim Industries, will release their quarterly earnings. Additionally, Shree Cement, Lupin, Tata Power, Life Insurance Corporation of India, and others will announce their quarterly numbers, adding to the market's volatility.

Domestic economic data, including the HSBC Services PMI for July and bank loan and deposit growth for the fortnight ended July 26, will be closely watched. On the global front, market participants will keep an eye on the Services PMI data from major nations, weekly US jobs data, and inflation numbers from China.

Oil prices, a crucial global factor, have plummeted sharply amidst US recession concerns, with Brent crude futures ending the week at $76.81 per barrel, the lowest since December 2023. This 5.3 percent drop marks the fourth consecutive week of declines, providing some relief for India, a major net oil importer.

The activity of FIIs and Domestic Institutional Investors (DIIs) will be key to watch. FIIs net sold shares worth Rs 12,756 crore, while DIIs offset this by purchasing shares worth Rs 17,226 crore. Looking ahead, FIIs are likely to pay closer attention to the US economy and markets, especially following recent weak jobs data and a decline in the US 10-year Treasury yield to 3.79 percent.

The primary market will be active, with new public issues hitting Dalal Street. In the mainboard segment, Brainbees Solutions' Rs 4,194-crore IPO and Unicommerce eSolutions' Rs 277-crore IPO will open on August 6. Ceigall India and Ola Electric Mobility's IPOs will also close next week.

Technically, the Nifty 50 may see more weakness and consolidation, given the sharp selling pressure after hitting a new high of 25,078 and the formation of a bearish candlestick pattern. The index may find support around the 24,600-24,400 zone before any rebound, with immediate resistance at 24,900.

Options data suggests 24,100-24,000 as key support zones for the Nifty, with 24,800 as the immediate hurdle. The volatility, as indicated by the India VIX, spiked sharply, jumping 16.92 percent to 14.32, making the market outlook even more uncertain.