Indian shares to open higher on strong growth data; Middle East jitters could temper optimism

Indian shares were anticipated to open marginally higher on Tuesday, buoyed by robust domestic growth data that exceeded expectations. However, the possibility of optimism being dampened by escalating crude oil prices amid renewed Middle East tensions loomed large. At 7:59 a.m. IST, GIFT Nifty futures were trading at 24,178 points, hinting at a favorable start for the Nifty 50.

The index had closed at a one-month low of 24,080.4 on Monday. India's economy grew 7.8% year-on-year in the April-June quarter, surpassing all predictions, thanks to a surge in investments and manufacturing, coupled with solid consumer demand. This positive economic outlook unfolded even as global markets were unsettled by ongoing geopolitical tensions resulting from the U.S.-Israeli war on Iran.

U.S. President Donald Trump had threatened further strikes against Iran on Monday after the first direct attacks in a month, heightening tensions in an economic standoff that had recently escalated into fresh hostilities. Iran retaliated by launching missiles at two U.S. air bases in Jordan following a U.S. strike on Iran’s Larak Island, further driving the tension in the region.

These developments lifted Brent crude futures to $91 per barrel. Asian stocks remained relatively unchanged as selling pressure fueled global bond yields to record highs on Tuesday, reflecting the heightened Middle East concerns. The 50-stock Nifty index declined by 1.2% in August due to Middle East jitters, with notable contributors such as HDFC Bank and Reliance Industries leading the decline.

The focus on Tuesday would also be on the weekly expiry of Nifty 50 derivatives contracts. A new closing auction session for stocks with derivatives contracts has been introduced in India, leading to significant swings in the cash market and options segment on the benchmarks' expiry days. This mechanism saw increased adoption on Monday, driven by changes to MSCI’s indexes, which resulted in passive flows in several stocks.

However, stock-specific volatility remained a factor. On Monday, foreign investors sold Indian shares worth 79.86 billion rupees ($839.20 million), according to provisional data.