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Sensex, Nifty May Extend Downtrend As Oil Rallies

Indian shares look set to open flat to slightly lower on Wednesday as investors keep an eye on the intensifying U.S.-China trade conflict.

Rallying oil prices and a weakening rupee may also weigh on markets ahead of industrial output and consumer inflation data due out later in the day.

Benchmark indexes Sensex and the Nifty fell over 1 percent for a second straight session on Tuesday while the rupee fell by another 24 paise to close at a fresh record low of 72.69 against the dollar, raising speculation that the Reserve Bank of India will follow through with more policy tightening in the coming months.

The rout in rupee coupled with rising oil prices helped fuel expectations that India's current account deficit would widen to 2.5-2.8 percent of the GDP in the current fiscal.

Asian markets held near 14-month lows this morning and the dollar index dipped against rivals, while oil extended gains from the previous session on concerns over Iranian sanctions and expectations of slower growth in U.S. crude oil production.

U.S. light crude settled up 2.5 percent to $69.25 per barrel on Tuesday, while Brent crude futures surged 2.2 percent to $79.10.

Overnight, U.S. stocks shrugged off initial weakness to close higher as technology shares continued to recover from recent string of losses. The Dow rose 0.4 percent, the tech-heavy Nasdaq climbed 0.6 percent and the S&P 500 added 0.4 percent.

European markets ended Tuesday's session lower after reports that China will ask the WTO for permission to impose sanctions on the United States. Investors also digested U.S. President Donald Trump's remarks that the U.S. was taking a tough stance with China.

The pan-European Stoxx Europe 600 index finished little changed with a negative bias. The German DAX and the U.K.'s FTSE 100 both edged down by 0.1 percent while France's CAC 40 index rose 0.3 percent.

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