Stock markets are heading into a crucial week, with investors likely to closely monitor government election results, crude oil prices and the ongoing conflict in the Middle East. Counting of votes for the assembly elections in West Bengal, Tamil Nadu, Kerala, Assam and Puducherry will begin on Monday, May 4, and analysts believe the results may impact market sentiment in the short term.
Last week, in the holiday-shortened session, the BSE Sensex rose 249.29 points or 0.32%, while the NSE Nifty rose 99.6 points or 0.41%.“The most immediate catalyst will be the key state election outcome, with investors closely watching whether the ruling party at the Center can wrest West Bengal from the Trinamool Congress and make meaningful inroads in opposition-ruled Kerala and Tamil Nadu, where the Bharatiya Janata Party (BJP) currently has a limited presence,” said Hariprasad K, research analyst and founder of Livelong Wealth.Besides domestic politics, investors are expected to follow developments in the Middle East, especially around the US-Iranian conflict and the Strait of Hormuz, as this may impact crude oil prices.Crude oil remains India’s largest macroeconomic factor, Hariprasad said.“With Brent crude oil prices remaining at elevated levels amid ongoing tensions around the Strait of Hormuz, inflation risks remain clear. For an import-dependent economy like India, persistently high crude oil prices are putting pressure on the rupee – which is currently near record levels – and impacting corporate margins as well as financial dynamics,” he added.
Ajit Mishra, senior vice president of research at Religare Broking Ltd, said that crude oil trends will remain the key external factor for the markets.“Crude oil price trends will remain the key external variable, and the ongoing standoff between the US and Iran and the closure of the Strait of Hormuz are likely to keep volatility high,” Mishra said.He added that key economic data to be released this week, including the HSBC manufacturing PMI on May 4, services and composite PMI on May 6, and foreign exchange reserves data on May 8, will also be important for investors.The Q4 earnings season will continue this week, with major companies like Ambuja Cements, BHEL, Hero MotoCorp, Mahindra & Mahindra and Bajaj Auto set to announce their results.Ponmudi R, CEO, Enrich Money, said markets are likely to remain volatile and driven by news flow.“Markets next week are likely to remain volatile and largely news-driven,” he said. “The main interest will remain on the evolving dynamic between the US and Iran – particularly whether the ceasefire holds, progress in diplomatic talks, and any developments related to the Strait of Hormuz.”The election results, especially in West Bengal, could lead to short-term volatility, said Santosh Meena, head of research at Swastika Investmart Ltd.“This week, markets are expected to initially react to the state election results, especially in West Bengal, which could lead to volatility for a day or two,” he said.He added that while crude oil prices fell slightly after approaching $120 per barrel, any new rise could harm Indian stocks.“Any fresh rise in oil prices could lead to renewed selling pressure on Indian stocks, while a sustained decline is likely to improve sentiment. Developments around US-Iran relations will be a critical driver of crude oil volatility. With the Q4 earnings season in full swing, equity and sector-specific moves are likely to continue. FII flows and rupee movements will also remain key factors to watch,” Meena added.