Benchmark equity indices remained under heavy selling pressure on Monday afternoon, with the Sensex tumbling over 750 points and the Nifty slipping below 24,150, as a sharp sell-off in banking stocks and a spike in crude oil prices weighed on investor sentiment.
At around 12.48 pm, the BSE Sensex was trading at 77,399.31, down 752.14 points (0.96%), while the Nifty50 fell 193.50 points (0.8%) to 24,140.80.
The biggest reason behind today’s stock market fall was the sharp decline in private banking stocks after their June-quarter earnings. HDFC Bank and Axis Bank slumped around 5% each, while Kotak Mahindra Bank also traded lower. Together, the three lenders dragged the benchmark indices sharply lower.
The weakness in banking shares outweighed gains in Reliance Industries, SBI, Bharti Airtel, ONGC and Tech Mahindra, keeping the broader market firmly in the red.
Apart from earnings, investors are also keeping a close watch on global developments after Brent crude oil prices climbed above $90 a barrel amid escalating tensions between the US and Iran.
Higher crude oil prices are a major concern for India, which imports more than 85% of its crude oil requirements. Costlier oil can increase the country’s import bill, widen the trade deficit, put pressure on the rupee and dampen foreign investor sentiment.
“There are near-term headwinds and tailwinds for the market,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
“The strongest headwind is Brent crude spiking above $90 on escalating tensions between the US and Iran. If this trend continues, India’s vulnerability to an energy shock will resurface with negative implications for the rupee and FPI flows,” he said.
At the same time, Vijayakumar said fading enthusiasm for the artificial intelligence trade in markets such as the US, South Korea and Taiwan could make India relatively more attractive for foreign portfolio investors.
On the earnings front, he described Reliance Industries’ June-quarter results as “promising”, while ICICI Bank delivered “stellar” earnings and Kotak Mahindra Bank also posted a strong performance. HDFC Bank, however, disappointed investors, particularly on the net interest margin (NIM) front, triggering a sharp sell-off in the stock.
With the earnings season picking up pace and crude oil prices remaining above $90 a barrel, investors are expected to closely track upcoming corporate earnings and geopolitical developments for cues on the market’s near-term direction.