Benchmark stock market indices opened lower on Wednesday as Brent crude oil climbed above $92 a barrel, fuelling concerns over inflation and corporate profitability amid the escalating conflict in the Middle East.
The BSE fell 367.92 points, or 0.47%, to 77,102.19, while the NSE Nifty50 declined 99.10 points, or 0.41%, to 24,088.60 at around 9:20 am.
The selling was broad-based, with weakness across banking, IT and pharma stocks outweighing gains in auto shares.
OIL SURGE WEIGHS ON SENTIMENT
Investor sentiment remained under pressure as Brent crude rose 1.16% to $92.07 per barrel, its highest level since June, while WTI crude climbed 1.03% to $85.21.
The spike in crude prices has intensified concerns about India’s import bill, inflation and the impact of rising input costs on corporate earnings. As the world’s third-largest crude importer, India is particularly vulnerable to sustained increases in oil prices.
Higher crude prices also tend to weigh on sectors such as aviation, paints, chemicals and consumer goods, while raising concerns over the country’s current account deficit and the rupee.
BANKING, IT LEAD DECLINE
Banking stocks remained under pressure, with the Nifty Private Bank index falling 0.83% and the Nifty PSU Bank index slipping 0.98%.
The Nifty IT index declined 0.69%, while Pharma (-1.13%), Healthcare (-0.97%) and Realty (-0.75%) were also among the worst-performing sectors.
Auto stocks bucked the trend, with the Nifty Auto index rising 0.97%, supported by optimism following encouraging June-quarter business updates from automakers. FMCG was largely flat, while the Metal index traded marginally higher.
The broader market also traded lower, although losses were relatively contained. The Nifty Smallcap 100 fell 0.46%, Nifty Midcap 100 slipped 0.23% and the Nifty Midcap 50 declined 0.29%.
India VIX, the market’s volatility gauge, rose 2.51% to 12.92, reflecting increased investor caution.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the geopolitical situation and rising crude prices are likely to remain the key headwinds for the market.
“The continuing US-Iran conflict and rising Brent crude price will continue to weigh on markets despite positive news on other fronts. The early automobile Q1 numbers are impressive and management commentary reflects optimism. Exports, too, are doing well,” he said.
He believes the correction in banking stocks may be nearing its end.
“The price correction in some of the leading banking names appears to be over. There is value in this segment,” Vijayakumar said.
He added that strong inflows into FCNR deposits should help keep the rupee stable.
“Rupee is likely to remain stable buoyed by positive news on the dollar flows from FCNR deposits, which has crossed $20 billion now. The inflows are likely to gather momentum, going forward.”
According to Vijayakumar, India’s markets also remain relatively attractive compared with some other Asian peers.
“Weakening of the chip trade and sharp correction in markets like South Korea during the last one month are making India relatively stable and attractive from the valuation perspective. FPIs are not selling big in India now and are turning buyers on some days.”
He advised investors to use market declines to accumulate quality stocks.
“Dips in the market will provide buying opportunities in fundamentally sound stocks. The outperformance of the broader market may continue in the near term.”