Benchmark stock market indices extended losses on Thursday afternoon, with the Sensex sinking nearly 600 points and the Nifty slipping below the 24,200 mark as weak global cues, rising crude oil prices, foreign investor selling and pressure from banking stocks weighed on sentiment.
The BSE Sensex was down 585.76 points, or 0.75%, at 77,258.76 around 12:47 pm. The NSE Nifty50 fell 166.35 points, or 0.68%, to 24,160.30.
Banking and IT stocks were among the biggest drags on benchmark indices during the session. Heavyweight financial stocks continued to remain under pressure amid sustained foreign portfolio investor (FPI) selling and concerns around earnings growth.
According to Reuters, the spike in crude oil prices following renewed tensions involving the US and Iran has hurt investor sentiment globally, especially in oil-importing economies like India. Brent crude reportedly moved above $100 per barrel amid concerns around the Strait of Hormuz and broader Middle East tensions.
The weakness in banking stocks also comes amid cautious positioning ahead of major Q4 earnings announcements.
State Bank of India (SBI), whose shares remained in focus, is expected to announce its Q4 results later in the day. According to The Economic Times, analysts are expecting muted profit growth because of treasury losses despite stable loan growth and margins.
Some recent Q4 earnings reactions have also added pressure to market sentiment. Shares of Indian Bank had fallen sharply after its Q4 results last week despite reporting profit growth, indicating investor concerns around valuations and earnings expectations.
Broader earnings-related volatility was also visible across sectors. Reuters reported that Britannia Industries fell after concerns around weak international sales, while Larsen & Toubro shares had earlier come under pressure after reporting a profit dip and warning of slower growth amid Middle East uncertainties.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said markets are likely to remain highly news-driven in the near term.
“In the near-term the market will continue to be news-driven, oscillating between hope and fear,” Vijayakumar said.
According to him, reports of a second round of talks between the US and Iran have helped keep hopes of de-escalation alive, while falling spot crude prices suggest markets are still expecting the conflict to remain contained.
However, he warned that any prolonged conflict could sharply push up crude oil prices and hurt equities globally by slowing growth and raising inflation.
“A prolonged war means slower growth and higher inflation for long. Such a scenario will push the market down,” he said.
Vijayakumar added that periods of uncertainty often create opportunities for long-term investors to gradually accumulate fundamentally strong stocks at reasonable valuations.