Indian stocks face weak open as crude oil prices, Hormuz tensions weigh on sentiment

Indian stock markets were bracing for a subdued Thursday morning, with futures contracts pointing to weakness even as most of Asia woke to gains. The Gift Nifty index—a real-time indicator of how the Nifty 50 will open—signaled a softer start for both the Sensex and Nifty, a muted signal that stood in sharp contrast to the broader regional momentum. Japan's Nikkei 225 had climbed more than 1 percent, while South Korea's Kospi surged past 3 percent, buoyed by softer U.S. inflation data that had eased fears of aggressive Federal Reserve action. Yet none of this optimism seemed to be crossing the water to India's shores.

The weight pressing down on Indian equities was familiar but persistent: crude oil prices remained stubbornly elevated, and the geopolitical tensions simmering around the Strait of Hormuz showed no signs of cooling. The standoff between the United States and Iran over this critical shipping chokepoint had become the dominant concern for domestic investors. Brent crude had eased slightly to below $89 per barrel, but the underlying risk premium—the extra cost baked into energy prices because of geopolitical uncertainty—remained firmly in place. For an economy that imports most of its oil, this translated directly into pressure on corporate margins and inflation.

That inflation concern had just become more concrete. India's consumer price index had ticked up to 4.45 percent year-over-year in the latest reading, crossing the Reserve Bank of India's comfort threshold for the second time since January. The number was in line with what analysts had expected, and the culprit was clear: food prices, not broad-based demand. Core inflation—the measure that strips out volatile food and energy items—remained contained. Still, the breach mattered. It meant the RBI's inflation target, set at 4 percent with a band of plus or minus 2 percentage points, was being tested again.

Analysts at Elara Securities saw little reason for the central bank to act. The domestic growth-inflation backdrop, they argued, did not warrant a rate hike at this moment. They expected the RBI to hold steady through the rest of 2026, with the possibility of a 25-basis-point increase only arriving in the first quarter of 2027. The timing of any Federal Reserve move remained the wild card—if the U.S. central bank surprised with rate hikes of its own, it could shift the calculus for Indian policymakers.

The immediate market dynamics, though, were being shaped by oil and geopolitics rather than monetary policy. Ponmudi R, chief executive of Enrich Money, put it plainly: the elevated crude prices driven by the U.S.-Iran tensions over Hormuz were the primary weight on domestic equities and would likely keep investor sentiment measured. Hariselvan Radhakrishnan, founder and chief executive of HST Wealth, echoed the concern, noting that while Brent crude had eased modestly, the unresolved situation in the strait continued to keep the geopolitical risk premium elevated in energy markets.

There were a few potential bright spots. The Tata Group, one of India's largest conglomerates, was in focus following the resignation of its chairman—a significant corporate event that could move stocks in the group. Bank Nifty, the index tracking financial stocks, had outperformed the broader market the previous day with a gain of 0.77 percent, suggesting that if sentiment improved, financials could lead any recovery. But for now, the market was waiting, watching the oil prices and the Strait of Hormuz, and preparing for another day of muted trading.