Indian stock market may have a big gap-down opening on Monday, Nifty 50 may slip below 24K this week; here's why

US-Iran war: Global markets, including Dow Jones futures and the Indian stock market, are set to open in less than 24 hours, yet there is no hint of de-escalation in the US-Iran war. Meanwhile, Kuwait, the UAE, Saudi Arabia, Iraq, and Qatar have confirmed at least partial shutdowns in their oil production. According to Reuters, Qatar declared force majeure on gas exports on Wednesday amid the US-Iran war, meaning global gas markets will experience shortages for weeks, even in the unlikely scenario that the conflict ends today, as Qatar supplies 20% of global liquefied natural gas. All these triggers signal that crude oil prices may touch $100 per barrel on Monday or in the next few sessions.

According to stock market experts, shutting down oil and gas facilities in some OPEC countries is not a simple process. Restarting oil and gas production may take up to a month. They predicted that crude oil prices will skyrocket on Monday and may reach $100/barrel in the next few sessions, if not on Monday. Experts said that soaring crude oil prices and a strong outlook are expected to drag the Indian stock market lower, and the Nifty 50 index may breach 24,000 this week. On why Nifty may go below 24,000, they said that the majority of the oil majors, including Sensex heavyweight Reliance Industries Ltd (RIL), are expected to drag the key benchmark indices, Nifty 50 and Sensex, in the near term.

What does the soaring crude oil price mean for the stock market?

Pointing towards the US-Iran war, Avinash Gorakshkar, a SEBI-registered fundamental equity analyst, said, "The global markets, especially the Dow Jones Futures and the Indian stock market, are about to resume trading activity in less than 24 hours. And yet there is no hint of de-escalation in the US-Iran war. In fact, several Middle Eastern countries, important OPEC members (Kuwait, the UAE, Saudi Arabia, Iraq, and Qatar), have announced partial shutdowns of oil and gas production. This partial shutdown decision is highly tricky as it would take from 15 to 30 days to restart production after the shutdown."

On how the partial shutdown in oil and gas production by these OPEC countries would impact various assets, Anuj Gupta, a SEBI-registered market expert, said, “The partial shutdown of oil and gas production is going to hurt the equity markets due to soaring crude oil prices. The Brent Crude oil is expected to touch $100 per barrel soon, if not on Monday.” He said that a production halt in Qatar would cost around 20% of the world's LNG supply.

Anuj Gupta said that rising crude oil prices are expected to fuel inflation, hurting the Indian stock market. He said that soaring crude oil prices would strengthen the petrodollar, which may put the brakes on the gold price rally. However, he suggested a buy-on-dips strategy for gold investors.

Nifty 50 may breach below 24,000

Expecting a big gap-up opening on Monday, Avinash Gorakshkar said, "After the one-month waiver given by US President Donald Trump to the Indian government for buying Russian crude oil, the market has an estimate that even the US administration believes that the US-Iran war may not end in one month. Therefore, crude oil prices are expected to have a big gap-up opening, and it is expected to put pressure on the global equity markets, including Dalal Street."

Anuj Gupta said the Nifty 50 index may open with a gap down and try to approach its current support at 24,200. If the crude oil sustains above $100/barrel, then we can expect the 50-stock index to break below 24,000 this week itself."

Amit Goel, Chief Global Strategist at PACE 360, said that 24,000 is a major support for the Nifty 50 index. A break below this support should be considered a major breakdown for the Nifty 50 index.

"If the Nifty 50 index breaks below 24,000 on a closing basis, which looks obvious due to the rising crude oil prices and the Indian Rupee coming under pressure due to the strong US Dollar, the next crucial support for the 50-stock index would come around 22,500. If the key benchmark index sustains below 24,000 for a few sessions, then one should remain assured that the Indian stock market is expected to remain under the bear's grip in the entire month, and the Nifty 50 index may continue to drop further with some dead-cat bounce," Amit Goel said.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.