The start of the week has brought little relief for investors on Dalal Street as the Sensex slipped nearly 500 points, while the Nifty fell below 23,800 and the selling has spread across several pockets of the market.
The biggest drag, however, has come from IT stocks, as fresh worries over US interest rates have added to the pressure from elevated prices and rising tensions in the Middle East.
At 1:33 pm, the BSE was down 491.80 points, or 0.64%, at 76,023.63. The index opened at 76,446.05 against Friday’s close of 76,515.43 and touched an intraday high of 76,477.19 before falling to a low of 75,980.69.
The Nifty 50 was down 142.55 points, or 0.60%, at 23,755.35. It opened at 23,883.15, touched a high of 23,890 and slipped to a low of 23,738.70.
The fall was broad-based, although the intensity of selling varied across sectors. The Nifty 100 declined 0.56%, Nifty 200 fell 0.57% and Nifty 500 dropped 0.53%. Nifty Midcap 50 declined 0.57%, while Nifty Midcap 100 fell 0.59%. Nifty Smallcap 100 was relatively resilient, down just 0.09%.
India VIX, however, jumped 5.59% to 11.28, indicating a rise in market volatility.
So, why is the Indian stock market falling today?
The biggest pressure point in Monday’s market has been the IT sector.
The Nifty IT index fell 2.74%, making it the worst-performing major sectoral index in the market. The weakness followed stronger-than-expected US jobs data, which has increased expectations that the US Federal Reserve could raise interest rates in September.
Indian IT companies have significant exposure to the US market. Higher US interest rates can put pressure on corporate spending and technology budgets, which in turn can affect the demand outlook for Indian IT services companies.
The selling was visible across the major IT names. HCL Technologies fell 1.49%, Infosys declined 1.28%, while the broader IT pack also remained under pressure.
Stronger-than-expected US jobs growth had boosted bets of a September rate hike by the Federal Reserve. US non-farm payrolls increased by 1.62 lakh in August, well above economists’ expectations of a gain of 56,000. Traders were pricing in about a 57% chance of a rate increase in September, according to the report.
That has become a direct concern for Indian IT stocks because higher US rates could curb client spending, particularly on discretionary technology projects.
The pressure is not limited to the biggest IT companies. The report said Infosys, LTI Mindtree and Mphasis fell around 3%, while Tech Mahindra, OFSS, Coforge, HCL Technologies, Wipro, Persistent Systems and TCS declined 1-2% during the session.
The second major concern is crude oil.
Brent crude was trading at $96.64 a barrel, up 0.37%, while WTI crude was at $91.59 a barrel, up 0.12%.
Crude prices have remained elevated as tensions in the Middle East have escalated, raising concerns about possible disruptions to oil flows. For India, this is particularly important because the country imports a large share of its crude oil requirement.
A sustained rise in oil prices can increase India’s import bill and put pressure on inflation, while also raising costs for companies that depend heavily on fuel or crude-linked inputs.
The impact can already be seen in the sectoral market. Nifty Oil & Gas was down 0.78%, while Nifty Auto was marginally higher by 0.16%. Nifty Chemicals declined 0.41%.
The rise in crude is also adding to the broader global inflation concern at a time when markets are already reassessing the path of US interest rates.
The third pressure point is the changing outlook for US monetary policy.
Stronger-than-expected US jobs data has increased expectations of a September rate hike by the Federal Reserve. The prospect of higher US rates is negative for global equities because it can raise borrowing costs and make US assets relatively more attractive to investors.
For emerging markets such as India, this can create pressure on equity flows and valuations.
The IT sector is particularly sensitive because a large portion of Indian IT companies’ revenues comes from the US, while higher borrowing costs could lead American companies to become more cautious with technology spending.
The ETMarkets report also noted that Indian IT has already been dealing with a difficult spending environment, including weak discretionary budgets and longer deal cycles, while AI-related concerns have added to the uncertainty around the traditional IT services model.
The sectoral picture showed where the selling was concentrated.
Besides IT, Nifty Media was down 2.92%, while Nifty Metal declined 1.23%. Nifty Realty fell 1.38%, Nifty PSU Bank declined 1.18% and Nifty FMCG fell 0.60%.
Nifty Financial Services 25/50 declined 0.47%, Nifty Financial Services Ex-Bank fell 0.48% and Nifty Private Bank dropped 0.31%.
Nifty MidSmall IT & Telecom fell 0.88%, while Nifty MidSmall Financial Services declined 0.37%.
There were some pockets of strength. Nifty Pharma gained 0.26%, Nifty Healthcare rose 0.24%, Nifty Auto gained 0.16%, Nifty MidSmall Healthcare advanced 0.16% and Nifty 500 Healthcare rose 0.37%.
Among the major Sensex stocks, Asian Paints was the biggest loser, down 1.61%. HDFC Bank and M&M fell 1.56% each, while HCL Technologies declined 1.49%.
Infosys fell 1.28%, SBI declined 1.22%, IndiGo dropped 1%, Hindustan Unilever fell 0.95% and TCS declined 0.89%.
Tech Mahindra was down 0.86%, ICICI Bank fell 0.61%, Maruti declined 0.60% and Bharti Airtel slipped 0.59%.
On the other hand, Adani Ports was the top Sensex gainer, rising 1.63%. Bajaj Finserv gained 1.02%, Power Grid rose 1%, NTPC advanced 0.96% and Titan gained 0.70%.
Reliance Industries was up 0.44%, Trent gained 0.43%, Bajaj Finance rose 0.37% and Sun Pharma gained 0.13%.
The sell-off was not confined to large-cap stocks, although small-caps were holding up better than mid-caps.
Nifty Midcap 50 was down 0.57%, while Nifty Midcap 100 declined 0.59%. Nifty Smallcap 100 was down only 0.09%.
The rise in India VIX, however, is notable. The volatility index was up 5.59% at 11.28, showing that nervousness among investors has increased even as the headline indices remain relatively contained in percentage terms.
There are still pockets of buying in the market. Pharma, healthcare and auto stocks are trading higher, while selected large-cap stocks such as Adani Ports, Power Grid, NTPC and Bajaj Finserv are providing some support.
The market is therefore not seeing indiscriminate selling across every stock. Instead, the pressure is concentrated in sectors most exposed to the current macro concerns, with IT taking the biggest hit.
For now, investors are watching three things closely: the trajectory of crude oil prices, developments in the Middle East and the Federal Reserve’s September rate decision.
The combination of elevated oil prices and higher US rate expectations has created a difficult backdrop for Indian equities. But Monday’s nearly 500-point fall in the Sensex is being amplified by the sharp sell-off in IT stocks, which are bearing the brunt of renewed concerns over US rates and technology spending.
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