Indian equity markets began the week on a weak note on Monday, with the benchmark indices falling sharply in early trade as investors worried about elevated crude oil prices, geopolitical tensions and the upcoming policy decision of the United States Federal Reserve.
The 30-share BSE Sensex dropped 536.30 points to 72,583.86 in early trade, while the 50-share NSE Nifty fell 200.10 points to 22,402.80, according to early market data. The decline extended a run of losses for Dalal Street, with benchmarks opening lower for a fifth consecutive session as selling pressure persisted across heavyweight stocks and most sectors.
Market breadth was weak, reflecting the broad-based nature of the selling. On the National Stock Exchange, 1,688 stocks declined, compared with 767 advances and 89 unchanged stocks, a pattern that pointed to caution rather than a sell-off concentrated in a handful of counters. The Nifty IT index fell 1.67 per cent, while the Nifty PSU Bank index declined 1.36 per cent and the Nifty Rural index lost 1.09 per cent.
The Nifty Pharma index was the only sectoral index shown in positive territory, rising 0.36 per cent.
Among the 30 Sensex companies, Asian Paints, Bajaj Finance, Hindustan Unilever, Infosys, Bajaj Finserv and Reliance Industries were among the major laggards. Kotak Mahindra Bank, Sun Pharma, Adani Ports and Axis Bank were the notable gainers, bucking the weak trend in early deals.
Selling in information technology shares was one of the key factors behind the decline. IT stocks shed around 2.3 per cent in early trade, leading the losses. Infosys lost more than 3 per cent after it slashed its annual revenue growth forecast, as weakness in its key North American market outweighed its higher-than-expected quarterly revenue. The downgrade weighed on sentiment across the sector, which has a large weight in both benchmark indices.
Crude oil was the other major concern for investors. Brent crude, the global oil benchmark, traded around 114 dollars a barrel, easing from a near six-month high of 117 dollars after the Indian market closed on Friday, though ongoing attacks on Saudi Arabia kept supply concerns in focus. For India, which imports a large share of its crude oil, higher prices raise worries about inflation, the trade deficit and the rupee, and they tend to dampen appetite for equities.
Investors were also cautious ahead of the US Federal Reserve's policy meeting on October 27 and 28. The central bank is widely expected to leave interest rates unchanged, but its guidance on the future path of policy could influence US Treasury yields, the dollar and foreign portfolio flows into emerging markets such as India.
A more hawkish tone could keep yields elevated and strengthen the dollar, constraining flows into Indian equities, while a more measured outlook could offer some relief to risk assets.
Asian markets largely mirrored the cautious mood. South Korea's Kospi, Japan's Nikkei 225 index and Shanghai's SSE Composite index quoted lower, while Hong Kong's Hang Seng index traded in positive territory. The US markets had ended lower on Friday, adding to the subdued global backdrop for Indian equities at the open.
Market experts said the pressure on Indian equities was likely to persist in the near term. Ponmudi R, chief executive of Enrich Money, an online trading and wealth technology firm, said Indian equities were likely to remain under pressure as elevated crude oil prices, escalating geopolitical tensions and uncertainty over the Federal Reserve's policy outlook weighed on investor sentiment.
The continuing stand-off in the Middle East, with the risk of further escalation, remained a key concern for domestic markets, he said.
Technical analysts were also cautious about the near-term outlook for the Nifty. According to Sachin Gupta, vice president of technical research at Choice Broking, the index faces immediate resistance at 22,750 to 22,800, and a sustained move above this range could ease selling pressure and open the way for a recovery towards 23,000.
On the downside, the index has immediate support at 22,400 to 22,300, and a decisive break below this zone could extend losses towards 22,200 to 22,000, he said.
The weakness came even as foreign institutional investors bought equities worth 887.65 crore rupees on Friday, according to exchange data. The buying, however, was not enough to offset the broader caution gripping the market, particularly with a busy week of corporate earnings and central bank announcements ahead.
As the session progressed, the market showed signs of stabilising. By mid-morning, the Sensex had turned green after beginning the session on a negative note, rising more than 200 points, while the Nifty traded beyond the 22,400 mark. The recovery suggested that some investors were using the early dip to buy, even though the overall mood remained fragile.
The early trade data also highlighted the stocks that bore the brunt of the selling. Asian Paints led the losers among Sensex constituents, falling 2.77 per cent, while Infosys and Bajaj Finance both declined 1.73 per cent. Hindustan Unilever dropped 1.72 per cent, HCL Technologies slipped 1.50 per cent, and State Bank of India fell 1.30 per cent. Maruti Suzuki, ICICI Bank, Mahindra and Mahindra, UltraTech Cement, ITC, NTPC and Power Grid also traded lower.
On the gaining side, Kotak Mahindra Bank led the early risers, gaining 2.08 per cent, followed by Sun Pharmaceutical Industries, which rose 1.01 per cent, and Adani Ports and Special Economic Zone, which gained 0.60 per cent. The mixed picture within the Sensex underlined that the selling, while broad, was not uniform, and that stock-specific factors continued to matter.
For ordinary investors, the session was a reminder of how quickly sentiment can shift on the back of global cues. Crude oil, central bank policy and earnings from large companies such as Infosys can move the entire market, and the interplay between these factors often matters more than any single piece of news. The coming days, with the Federal Reserve meeting and a string of quarterly results, are likely to set the tone for the rest of the month.
The fifth consecutive session of declines also raises questions about whether the market is entering a deeper correction or merely pausing after a long run. Analysts caution against reading too much into a single morning's trade, noting that indices have repeatedly recovered from early losses in recent sessions.
What matters more, they say, is whether the Nifty can hold its support zone and whether foreign investors return in size once the global policy picture becomes clearer.
For now, Dalal Street remains in a wait-and-watch mode, with crude oil prices, the Middle East situation and the Federal Reserve's words holding the key to the next move.
(Reporting based on Deccan Herald and NDTV Profit.)