Opening bell: U.S. futures, Asian stocks slide, oil spikes after strikes on Iran; will there be Monday blues for Sensex, Nifty?

The Indian benchmark indices, the BSE Sensex and the NSE Nifty, are poised to start the week on a bearish note, mirroring weakness in Asian peers and a spike in crude oil prices as investors reacted to American strikes on three Iranian nuclear sites over the weekend. U.S. stock futures also fell in response to the attacks, with all three indices—Dow futures, S&P 500 futures and Nasdaq futures—sliding up to 100 points amid concerns that escalating geopolitical tensions in the Middle East would drive a risk off sentiment.

At 7:35 a.m., the GIFT Nifty futures were trading 123 points lower at 25,005, indicating a gap-down start for the Sensex and Nifty50.

On Friday, the Indian equities market ended on a strong note, ending a three-session-long losing streak, amid sustained buying across sectors after news reports indicated a possible de-escalation in the Israel-Iran conflict. The Nifty50 and the Sensex surged 1.3% each, with the indices reclaiming the key psychological level of 25,000 and 82,000, respectively, amid ease in geopolitical concerns after the U.S. signaled a delay in potential action, which led to a softening in crude oil prices.

Asian stocks open in the red on geopolitical concerns

In the Asia-Pacific region, all major markets were flashing in the red amid heightened tensions in the Middle East after U.S. airstrikes targeted nuclear facilities in Iran. Investors remained on edge as they awaited the Iranian response after its foreign minister Abbas Araghchi said his country "reserves all options in response to U.S. attacks." Meanwhile, U.S. President Donald Trump has warned Iran: “Any retaliation by Iran against the United States of America will be met with force far greater than what was witnessed tonight.”

Japan’s Nikkei 225 index dropped 0.5%, Hong Kong’s Hang Seng slid 0.7%, and China’s Shanghai Composite opened marginally lower. South Korea’s Kospi fell 0.55%, Singapore’s Straits Times lost 0.7%, and Australia’s ASX 200 tumbled 0.8%. Taiwan Weighted index and Indonesia’s Jakarta were the worst performers in the region, plummeting up to 1.8% and 2%, respectively.

Oil prices continue to rise

Oil prices continued to rise on Monday after U.S. air strikes on Iran's nuclear facilities amid concerns about retaliations that could disrupt the flow of oil. Notably, Iran is the world's ninth-largest oil-producing country, with output of about 3.3 million barrels per day, while the Strait of Hormuz carries one-fifth of global oil output.

In early trade today, both Brent and the main U.S. crude contract WTI surged by as much as 4% to hit their highest price since January. At the time of reporting, Brent Oil Futures were up 1.6% at $76.69 per barrel, while the Crude Oil WTI Futures climbed 1.8% to $75.22 a barrel.

FII trends

After a strong investment of ₹19,860 crore in May, foreign institutional investors (FIIs) turned less confident in June with bouts of selling and buying. Net FII activity till June 20 was a sell figure of ₹4,192 crore, according to NSDL data. 

“Given the global uncertainty dominated by geopolitics, particularly the war in West Asia, FPI activity will be in response to the geopolitical developments," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

He said that FIIs will continue to be sellers in the debt market. The yield differential between U.S. and Indian sovereign bonds is at a historic low of around 2%. “Given the currency risk, it doesn’t make sense to invest in bonds and, therefore, this trend of FPI selling in bonds is likely to continue.”

Key levels to watch

The Nifty index is expected to retest the upper boundary of the recent five-week consolidation zone, currently pegged near the 25,200 mark. A decisive breakout above this resistance band could open the door for an upward extension towards the 25,500 zone in the near term, Bajaj Broking Research said in a note.

“As long as the index sustains above the prior week's swing low of 24,700, the near-term bias is expected to remain constructive,” it said.

Key short-term support is placed in the 24,500–24,400 zone being the confluence of the 50-day EMA and the lower band of the last five weeks' consolidation range, the brokerage said.

For Bank Nifty, the index is projected to maintain positive bias and head towards 56,700 and 57,400 levels in the coming weeks. The immediate bias remains positive above 55,500 levels. The daily 14 period RSI has generated a buy signal, thus validating a positive bias in the index.