Benchmark indices opened sharply lower on Tuesday, extending losses from the previous session as rising crude oil prices, a record-low rupee and concerns over global geopolitical tensions weighed heavily on investor sentiment.
The BSE Sensex fell over 400 points in early trade to 75,611.60, down 403.68 points or 0.53% at 9:18 am. The NSE Nifty50 also slipped below the crucial 23,800 mark, trading at 23,703.65, down 112.20 points or 0.47%.
The selloff was led largely by information technology stocks, with heavyweights Infosys and TCS declining more than 2% each amid weak market sentiment and concerns around slowing global demand.
Infosys emerged as one of the top laggards on the Nifty, falling nearly 2.9% to Rs 1,143.10, while TCS dropped around 2.4% to Rs 2,335.30. HCLTech declined 1.76%, while Tech Mahindra and Wipro also traded lower in early deals.
Banking stocks too remained under pressure, with ICICI Bank falling over 1%, while HDFC Bank, Axis Bank and SBI Life traded in the red.
The weakness in equities comes as the against the US dollar earlier in the day, rattled by surging crude oil prices and escalating concerns around the fragile US-Iran ceasefire.
Rising crude oil prices have emerged as a major concern for Indian markets because India imports more than 85% of its oil requirements. Higher oil prices are expected to widen the current account deficit, increase inflationary pressures and hurt corporate margins.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the prime minister’s recent austerity appeal has also impacted sentiment in consumption-linked sectors.
“The austerity call by the prime minister impacted the stock prices of sectors which are expected to be negatively affected by reduced consumption. Stocks of sectors like jewellery, travel and hotels bore the brunt of selling yesterday,” he said.
He added that these sectors could recover sharply if crude oil prices decline meaningfully and concerns around austerity measures ease.
“It is important to understand that these sectors will bounce back smartly if crude falls sharply and the austerity package becomes irrelevant. Therefore, watch out for the West Asia geopolitical situation and crude prices,” Vijayakumar said.
According to him, sectors relatively insulated from the government’s conservation push are likely to remain resilient.
“Pharmaceuticals is the segment which is not impacted at all since the sector has inelastic demand. Additionally, it gains from rupee depreciation. FMCG also will be least impacted,” he said.
He also pointed to improving capital expenditure trends in the economy.
“One sector to watch out for is capital goods. There are clear signs of recovery in capital formation as indicated in the 67% spurt in private capex in September last year. This positive news has been drowned in the flood of negative news,” Vijayakumar said.
“If this private capex cycle is to sustain, the capital goods stocks will do well. Demand in sectors like automobiles and renewable energy continues to be buoyant supporting capex in these sectors,” he added.
Meanwhile, some oil-linked and metal stocks bucked the broader market weakness. ONGC surged nearly 4% in opening trade as higher crude prices boosted sentiment around upstream energy companies. Hindalco gained over 1.8%, while Tata Consumer and SBI also traded in the green.
Market participants are now closely tracking crude oil movements, foreign institutional investor activity and possible intervention by the Reserve Bank of India to stabilise the rupee.
Analysts expect volatility to remain elevated in the near term as global investors react to developments in West Asia and concerns around energy prices continue to dominate market sentiment.