Nifty, Sensex Set to Open: Key Cues From Wall Street, FIIs Before August 4

Indian equity benchmarks are poised for a steady start on Tuesday, August 4, after a four-day winning streak that has seen the Nifty surge 1.6% and the Sensex jump 544 points. The rally has been driven by a sharp drop in crude oil prices and renewed buying by foreign institutional investors (FIIs), but traders are treading cautiously ahead of the Reserve Bank of India's policy outcome later this week.

Crude's Slide Lifts Sentiment

The most significant trigger for the recent upmove has been the steep decline in global crude prices. A softer oil outlook eases inflationary pressures and trims India's import bill, a key concern for the fiscal deficit and the rupee. Lower crude also improves the earnings outlook for sectors such as aviation, paints, and FMCG, which are highly sensitive to input costs.

Brent crude futures have retreated sharply from recent highs, and market participants are now watching whether the trend sustains. Any rebound in oil prices could quickly reverse the positive bias, especially if geopolitical tensions flare up again.

FIIs Turn Buyers, But DIIs Remain Cautious

After weeks of sustained selling, foreign portfolio investors have shifted to the buying side in the last few sessions. Provisional data suggests that FIIs were net buyers in the cash market, providing crucial support to the indices. Domestic institutional investors (DIIs), however, have been more measured, booking profits at higher levels.

The change in FII stance is being attributed to a softer dollar index and expectations that the US Federal Reserve may pause its rate hike cycle. That has improved risk appetite for emerging markets, with India being a preferred destination given its strong macroeconomic fundamentals.

Wall Street Cues Offer Mixed Signals

Overnight, US indices closed with modest gains, though tech-heavy Nasdaq lagged. Investors are parsing a batch of economic data that points to a cooling labour market, which could influence the Fed's next move. For Indian traders, the key takeaway is that global risk sentiment remains fragile, and any sharp move on Wall Street could spill over into domestic trading.

Meanwhile, Asian markets are likely to open on a cautious note, tracking mixed cues from the US. The dollar's trajectory and US Treasury yields will be watched closely, as they impact FII flows into emerging markets.

RBI Policy: The Big Trigger

The Reserve Bank of India's monetary policy committee is set to announce its decision later this week, and that remains the single biggest event for the market. With inflation trending within the central bank's tolerance band, most analysts expect a status quo on rates. However, commentary on liquidity and growth will be parsed for hints about future action.

Traders are also keeping an eye on the rupee, which has stabilised in recent sessions. A stable currency is crucial for foreign investors, and any sharp depreciation could dampen the current risk-on mood.

What to Watch on August 4

On the domestic front, investors will track sectoral moves, particularly in oil marketing, banking, and IT. The Nifty is trading near the 24,800 level, and a breakout above that could open the door for further upside. On the downside, support is seen around 24,300–24,400.

Volatility is likely to remain elevated as participants position themselves ahead of the RBI decision. Global cues, especially crude prices and US futures, will set the tone early in the session.

In the near term, the market's direction hinges on the RBI's stance and whether FII buying sustains. If the central bank signals a prolonged pause and oil remains soft, the rally could extend. However, any hawkish surprise or spike in crude could quickly bring profit-booking to the fore.