Benchmark stock market indices opened lower on Thursday, tracking weakness across Asian markets as renewed hostilities between the US and Iran kept investors on edge despite occasional signs of de-escalation in the conflict.
The S&P BSE was down 287.60 points, or 0.39%, at 74,058.57 in early trade, while the NSE Nifty50 slipped 95.15 points, or 0.41%, to 23,313.30.
Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said the near-term outlook remains challenging due to a combination of geopolitical uncertainty and sustained foreign investor selling.
“In the near-term, headwinds are stronger for the market than tailwinds. The continuing uncertainty in West Asia and the big and sustained FPI selling are the strong headwinds which are weighing on the market. In the absence of any resolution of the West Asia crisis, there is no scope for a healthy rally in the market,” he said.
The cautious mood comes amid continuing uncertainty in West Asia, which has kept prices elevated and prompted foreign investors to remain sellers in Indian equities.
Broad-based weakness was visible across the market. The Nifty Midcap 100 fell 0.42%, while the Nifty Smallcap 100 declined 0.11%. India VIX, the market’s fear gauge, remained elevated at 16.28.
Among sectoral indices, Nifty IT continued to be the biggest drag, falling 5.57% after Wednesday’s sharp sell-off. Nifty Realty declined 1.39%, Nifty FMCG slipped 1.01% and Nifty Consumer Durables fell 0.81%. On the positive side, Nifty PSU Bank gained 1.70%, Nifty Private Bank rose 0.70% and Nifty Healthcare advanced 0.54%.
The main trigger remains the uncertainty surrounding the US- conflict. Investors had recently hoped that diplomatic efforts could lead to a ceasefire and lower oil prices. However, renewed clashes involving US and Iranian forces, along with fresh tensions in Lebanon, have reduced hopes of an immediate resolution.
Higher crude oil prices remain a concern for India, which imports the majority of its energy needs. Elevated oil prices can worsen inflation, increase the current account deficit and put pressure on economic growth.
Foreign portfolio investor (FPI) selling has also continued to weigh on sentiment. Market participants remain concerned that global investors may continue shifting money toward markets such as the US, Japan, South Korea and Taiwan, where technology and AI-linked stocks have delivered stronger returns.
Eternal emerged as the top gainer in early trade, rising 1.44%, followed by Titan which gained 1.18% and Asian Paints which added 1.15%. Tech Mahindra rose 0.82%, while Adani Ports and Special Economic Zone advanced 0.43%.
On the losing side, TCS was the biggest laggard, falling 2.41%. Infosys declined 1.24%, HDFC Bank slipped 1.10%, Bajaj Finserv lost 0.97% and Kotak Mahindra Bank fell 0.72%.
Vijayakumar noted that aggressive short positions held by FPIs in the derivatives market indicate potential downside risks if geopolitical tensions remain unresolved.
“The aggressive short positions of the FPIs in the derivatives market indicate further potential downside unless there is an unexpected resolution to the West Asia crisis bringing crude prices down,” he added.
At the same time, he believes market weakness could create opportunities for long-term investors.
“Market weakness will offer buying opportunities in high quality stocks under temporary pressure from FPI selling. Pharmaceuticals which are weak now have the potential to stage a comeback. Auto and auto ancillaries look good for the long-term,” he said.
Investors will now closely watch developments in West Asia, foreign fund flows and the RBI’s upcoming monetary policy decision for further direction.