Benchmarks trade with limited losses; European shares open lower

The key equity barometers traded with limited losses in afternoon trade amid renewed US-Iran tensions that pushed crude oil prices higher and kept investors in a risk-off mood. Brent crude rose above the $90-per-barrel mark, raising concerns over inflation and its potential impact on interest-rate expectations.

Market participants remained cautious ahead of the MSCI index rebalancing, which is expected to trigger sizeable passive fund flows under the new Closing Auction Session (CAS) mechanism. The Nifty traded below the 24,100 level.

Investors will closely track movements in crude oil and gold prices, domestic and US bond yields, the rupee, and developments surrounding the US-Iran conflict. The trajectory of monsoon rainfall and its implications for rural demand and inflation will also remain on the radar.

At 13:25 IST, the barometer index, the S&P BSE Sensex declined 267.30 points or 0.35% to 76,997.21. The Nifty 50 index dropped 109.05 points or 0.48% to 24,066.60.

The broader market underperformed the frontline indices. The BSE 150 MidCap Index plunged 0.50% and the BSE 250 SmallCap Index tumbled 0.39%.

The market breadth was negative. On the BSE, 1,746 shares rose and 2,502 shares fell. A total of 299 shares were unchanged.

Gainers & Losers:

ICICI Bank (up 1.24%), Mahindra & Mahindra (up 0.77%), Bajaj Auto (up 0.63%), Grasim (up 0.53%) and Maruti Suzuki (up 0.46%) were the top gainers.

Adani Enterprises (down 4.99%), Adani Ports (down 2.85%), Tata Steel (down 2.51%), Infosys (down 1.87%), Hindalco (down 1.77%) were the top losers.

Stocks in Spotlight:

Karbonsteel Engineering surged 6.50%. The company received multiple purchase orders aggregating Rs 67.14 crore from India?s largest diversified conglomerate.

Avantel advanced 2.39%. The company announced that it had secured a contract worth Rs 117.88 crore from the Defence Research and Development Organisation (DRDO), under the Ministry of Defence, Government of India.

Indraprastha Gas rose 2%. The company has increased the price of compressed natural gas (CNG) by Rs 3.89 per kg.

Global Markets:

European equities edged lower while Asian markets declined on Monday as a sharp military escalation in the Middle East drove crude prices above $90 a barrel, while aggressive re-pricing of U.S. interest rate hike expectations ushered in a high-stakes week of macroeconomic data. Investors also assessed a more hawkish policy outlook from Federal Reserve Chair Kevin Warsh. Warsh said the Fed would have ?work to do? if it was not confident that underlying inflation was returning to its 2% target, prompting markets to raise the probability of a September rate hike to around 57%.

Meanwhile, China's manufacturing activity remained in contraction for a second consecutive month in August, although the pace of decline eased. The official manufacturing Purchasing Managers' Index rose to 49.8 from 49.2 in July, remaining below the 50 mark that separates expansion from contraction. The reading was also better than economists' expectations.

US equities ended lower on Friday after Warsh's Jackson Hole speech revived concerns over tighter monetary policy. The S&P 500 fell 0.25% to 7,711.76, the Dow Jones Industrial Average slipped 0.02% to 53,559.99 and the Nasdaq Composite declined 0.52% to 26,402.42.

The combination of higher rate expectations, elevated bond yields and renewed geopolitical tensions has increased pressure on global risk assets. Markets will now turn to upcoming US employment and inflation data for further clues on the Federal Reserve's policy path.

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