Nifty may open 200 points lower as Asian stocks wilt

After scaling historic highs on Thursday, it appears domestic benchmarks are heading for a sharp fall on Friday, amid a global rout.

Asian stock markets crashed across the board on Friday, amid escalating tension between Israel and Iran and a weak set of economic data in the US.

Nikkei slumps nearly 5%

Japan markets were the worst affected with the Nikkei falling around 5 per cent. The rest of the markets in the region cracked between 0.5 per cent and 3 per cent. Overnight, US stocks cracked 1.3 per cent to 2.3 per cent, as data showed the number of Americans filing new applications for unemployment benefits increased to an 11-month high last week, a day after the US Federal Reserve signalled that its rate cut could come as soon as September. Besides, underwhelming performances of some big companies, including Intel, dragged the market further.

Meanwhile, Nifty futures at Gift City ruling at 24,800 indicates a gap-down opening of over 200 points for Nifty, as Nifty August futures closed at 25,032. Analysts are advising investors and traders to remain cautious given the elevated valuation.

‘Be cautious’

Deepak Jasani, Head of Retail Research, HDFC Securities, said: Nifty crossed the 25,000 figure on Aug 01 covering the last 1000 points journey in just 24 sessions. This up-move came despite the initial negative reaction to the Union Budget, developments on the Israel-Hamas conflict, deepening US-China trade tensions, FPI selling in Indian markets, uninspiring Q1 results from Indian companies and a US megacap tech sell-off. Falling US inflation raised expectations of a US Fed rate cut, positive Indian macros and encouraging domestic flows helped offset these negatives to some extent.

Neeraj Chadawar, Head - Fundamental and Quantitative Research, Axis Securities, said despite global volatility, India’s economy remains strong, as indicated by the recent Union Budget’s emphasis on infrastructure, fiscal prudence, and rural welfare. “While midcap and smallcap stocks have made significant gains, it is believed that large-cap stocks may see increased investor interest in the near future. Investors should stay in the market, maintain liquidity, and consider investing in high-quality companies with strong earnings visibility over a 12-18 month horizon. Defensive sectors such as non-banking financial companies (NBFCs), telecom, consumption, IT, and pharmaceuticals are expected to be relatively safer in the near term,” he added.

Aamar Deo Singh, Sr. Vice President of Research, Angel One Lt, said: Markets hit a record high with the benchmark Nifty closing above the 25000 mark, for the first time ever on the back of positive cues from the US Fed regarding the increased likelihood of a rate cut in September, and overall sustained domestic inflows in the markets. “Investors need to be selective in their investment approach at such elevated levels, and should look at investing in quality names in a staggered manner, with a long-term investment perspective,” he said.