New Delhi, March 8 Developments related to the ongoing conflict in West Asia and its impact on crude oil prices would be the major driving factors for stock markets this week, analysts said.
In addition, global market trends and trading activity of foreign investors would also influence investor sentiment.
"This week, movements in global crude oil prices and further geopolitical developments in West Asia will remain critical external variables influencing market direction. The week will also feature key macroeconomic releases that could shape near-term sentiment."
"On the domestic front, investors will closely monitor the Consumer Price Index (CPI) inflation data scheduled for March 12," said Ajit Mishra – SVP, Research, Religare Broking Ltd.
Brent crude, the global oil benchmark, jumped 8.52 per cent to USD 92.69 per barrel.
"The week ahead is likely to remain volatile, with market sentiment largely shaped by persistent geopolitical tensions in the Middle East. Investors will closely track global developments, particularly movements in crude oil prices, as energy markets continue to play a critical role in influencing overall risk appetite," said Ponmudi R, CEO - Enrich Money, an online trading and wealth tech firm.
In addition, foreign institutional investor (FII) flows and currency movements will remain key variables to watch, as they provide important signals on global capital allocation trends and investor confidence in emerging markets such as India, he added.
Last week, the BSE benchmark tanked 2,368.29 points or 2.91 per cent, and the Nifty declined 728.2 points or 2.89 per cent.
Markets ended the holiday-shortened week with steep losses as escalating geopolitical tensions in West Asia and a sharp spike in crude oil prices weighed heavily on investor sentiment, Mishra added.
Foreign investors pulled out Rs 21,000 crore (around USD 2.3 billion) from Indian equities over the last four trading sessions amid the West Asia crisis.
"Uncertainty surrounding the Middle East conflict, steady decline in the market, the vulnerability of the Indian economy to a sharp crude spike, and the sharp depreciation of the rupee contributed to the sustained FII selling in the cash market," said V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
FPIs are unlikely to return to the market as buyers until there is some clarity on the outcome of the conflict and a decline in the price of crude, Vijayakumar said.
Brent crude trading above USD 90 is bad news for the Indian economy and markets, he added.
The US and Israel launched military strikes on Iran on February 28, killing Ayatollah Ali Khamenei, Iran's supreme leader.
Following the military offensive, Iran has carried out a wave of attacks mainly targeting Israeli and American military bases in several Gulf countries, including the UAE, Bahrain, Kuwait, Jordan and Saudi Arabia.
