Stock markets opened lower on Thursday, extending losses for a third consecutive session as escalating tensions in the Middle East pushed crude oil prices above $110 a barrel, fuelling concerns over inflation and India’s import bill.
Selling across banking, auto, metal and other heavyweight stocks dragged the benchmarks lower, while investors also assessed the latest signals from the Reserve Bank of India’s rate-setting panel.
The BSE Sensex was trading at 73,096.47, down 613.22 points or 0.83%, around 9:22 am. The NSE Nifty 50 fell 236.65 points, or 1.04%, to 22,574.70 around 9:23 am.
The decline followed losses in the previous two sessions, reversing some of the market’s recent recovery. With crude oil prices elevated and global uncertainty persisting, investors remained cautious despite strength in a handful of individual stocks.
CRUDE OIL ABOVE $110 ADDS TO MARKET PRESSURE
Rising crude oil prices were a key concern for investors. Brent crude futures rose 1.53% to $110.48 a barrel in the latest snapshot, while US West Texas Intermediate crude gained 1.21% to $98.33.
The rise came amid escalating tensions in the Middle East. Further attacks in Saudi Arabia by Yemen’s Houthi forces prompted the US to order some diplomats and family members to leave its missions in the kingdom.
Higher oil prices are a concern for India, which imports most of its crude oil requirements. A sustained rise can increase the import bill, put pressure on the rupee, fuel inflation and squeeze corporate profit margins.
Minutes of the RBI’s latest monetary policy meeting, released on Wednesday, also showed that members of its rate-setting panel believed further rate hikes might be needed to contain inflation. However, they stopped short of endorsing aggressive tightening, citing risks to economic growth.
BROADER MARKETS UNDER PRESSURE
Selling was widespread across the market, with 15 of the 16 major sectoral indices in the red in the supplied market snapshot.
The Nifty 100 fell 1.14%, the Nifty 200 declined 1.24% and the Nifty 500 dropped 1.27%. Mid- and small-cap stocks also came under pressure, with the Nifty Midcap 50 down 1.66%, the Nifty Midcap 100 lower by 1.65% and the Nifty Smallcap 100 declining 1.48%.
Among sectoral indices, the Nifty Auto index fell 1.86%, while the Nifty Metal index dropped 2.01%. The Nifty FMCG index declined 1.55%, the Nifty Pharma index slipped 1.58% and the Nifty Financial Services 25/50 index fell 1.09%.
The Nifty IT index declined 0.44%, while the Nifty Private Bank index was down 0.39%. India VIX, a gauge of expected market volatility, rose 5.58% to 16.55, indicating heightened nervousness.
IT STOCKS OFFER LIMITED SUPPORT
The broader sell-off also affected heavyweight technology stocks. HCLTech fell 0.29%, TCS declined 0.60% and Wipro was under pressure, while Infosys edged up 0.07% and Tech Mahindra gained 0.18%.
Eternal was among the few notable gainers in the Sensex stock snapshot, rising 1.03%. Axis Bank also edged up 0.11%, but most heavyweight stocks traded lower.
The weakness across several sectors suggests that buying interest remained selective, with investors cautious about the effect of higher oil prices and global uncertainty on earnings.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the recent market trend had been one of large-caps outperforming mid- and small-cap stocks.
He said the resilience of the broader market in recent months had been driven more by liquidity than earnings, while September data from the Association of Mutual Funds in India (AMFI) showed an increasing preference for mid- and small-cap stocks over large-caps.
According to Vijayakumar, this has created a situation in which mid- and small-cap stocks, particularly small-caps, appear overvalued alongside relatively attractively valued large-caps. He expects this divergence to correct and the trend of large-cap outperformance to continue.
He also warned that elevated crude oil prices and high US bond yields were encouraging bearish positions in the market, even on days when foreign and domestic institutional investors were net buyers.
Vijayakumar said investors could consider shifting towards fairly valued large-cap stocks, adding that the strategy may take time to pay off but could be rewarding.
Investors will track crude oil prices, developments in the Middle East, global bond yields and signals on the RBI’s policy outlook. The direction of foreign institutional flows and the ability of large-cap stocks to attract buying interest will also remain important.
With the Nifty under pressure and volatility rising, market direction is likely to remain sensitive to geopolitical developments and inflation concerns. A sustained easing in crude oil prices could help sentiment, while further increases may keep investors cautious.
