Stock Market Outlook: Fed Decision, Oil Prices Among 3 Cues to Watch on D-Street Next Week

Stock Market Next Week: While D-Street witnessed a subdued market trajectory last week, 'Friday the 13th' further dampened the overall sentiment. Rising tensions between Israel and Iran drove up crude oil prices and prompted investors to move their money into safe-haven assets. On Friday, gold futures surpassed the ₹1,00,000 level mark on the MCX for the first time. As a result, benchmark indices Sensex and Nifty fell by over 1%.

BSE Sensex concluded the week at 81,118.60 level, down by over 1,300 points or 1.66%. Whereas, the Nifty50 index plummeted over 375 points or 1.5%, ending the week below the psychological 24,800 level.

Wall Street and Asian peers followed suit. On Friday alone, the S&P500 index dropped over 1.13% or 68 points, to conclude the trading session at 5,976. Dow Jones declined by nearly 770 points or 1.79%. Hang Seng witnessed a decline of more than 140 points or 0.59%. Japan's Nikkei followed a similar trail and dropped over 300 points or 0.89%.

Market sentiment remained jittery as investors feared escalating tensions between Israel and Iran. "The correction was primarily driven by renewed geopolitical risks in the Middle East. Reports of Israel’s retaliatory strike on Iran escalated tensions, triggering a broad-based risk-off sentiment globally. This geopolitical flare-up led to a surge in crude oil and gold prices, while equity markets across the globe witnessed sharp declines," said Ajit Mishra– SVP, research, Religare Broking Ltd.

While broader sentiment continues to take a bearish tone, next week will witness major events, including the Fed's rate decision, that might change the course of the market trajectory. Here are 3 things investors must watch out for next week-

1. Crude Oil Prices

Last week, Israel reportedly launched an air strike on Iran’s energy facilities and nuclear sites. Whereas, Iran fired about 200 missiles and drones at major Israeli cities, including Haifa, which is near its largest oil refinery. Both nations continue to exchange direct strikes, leading to a sharp surge in crude oil prices.

While upstream oil companies in India, like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd. (OIL), witnessed a decent rise in stock prices. Shares of downstream Oil firms, including BPCL and HPCL, experienced a sharp plummet as investors feared margin pressures to impact earnings. Other sectoral stocks, including aviation and paints, followed the downtrend.

"The Middle East crisis had a direct impact on global oil prices, which surged sharply, with Brent crude jumping by as much as 12% to nearly $78 per barrel. Rising oil prices are particularly concerning for India, which imports a significant portion of its crude oil, as they fuel inflationary pressures," said Puneet Singhania, director at Master Trust Group.

2. Fed Rate Decision

Wall Street investors are expecting the Federal Reserve to keep interest rates on hold at the current range of 4.25%-4.50%, according to multiple reports. The surging trend in the oil price level has removed the chances for any possible rate cut as inflationary concerns loom. Meanwhile, the tariff turbulence, set to take effect from July 9, continues to haunt global supply chains. "Higher oil prices have reduced the likelihood for an interest rate cut by the US Federal Reserve, which is scheduled to meet next week," Singhania said.

3. Technical Outlook

On Friday, D-street's fear gauge, Nifty Vix, spiked over 7% as investors remained anxious about how things pan out on the global front. "Technically, the Nifty has re-entered its consolidation range, and a decisive move beyond the 24,400–25,200 zone will be required to establish the next directional trend. In the event of a breakdown, the 24,000 level is expected to act as a crucial support, whereas a breakout above 25,200 could trigger a sustained rally toward the 25,600 mark," Mishra said.

Analysts suggest that investors should adopt a cautious approach and stick to a range-bound trading strategy, as volatility continues to drive Dalal Street’s overall direction.