The Indian stock markets came under selling pressure in early trading today, as rising crude oil prices and continued geopolitical tension had investors worried about their appetite for stocks. Sensex and Nifty 50 both started down, and information technology stocks were on track to be the biggest sellers on the indices.
At 10:00 a.m. today, the Sensex was down 342.41 points, or 0.44 percent, at 77,666.84. The Nifty 50 was at 24,278.30 and down 87.70 points, or 0.36 percent.
There were signs of rising crude oil prices and worries about Middle East security.
In the meantime, IT stocks are leading the way down
Selling pressure was particularly visible in the IT sector during the opening hours.
At 10:35 a.m., many large tech stocks were in the red. Infosys was the worst loser with a 1.37% decline, and HCL Technologies declined 1.24%.
Tata Consultancy Services (TCS) was down 1.20% and Tech Mahindra 1.14%.
Hindustan Unilever was also among the leading Sensex laggards, falling 1.33%.
The weakness of large-cap IT stocks put pressure on the benchmark indices even though large technology companies account for most of the weight in the Indian market.
What stocks have gained on Sensex?
On top of all the news about the market’s downturn, there were some stocks that were even trading in positive territory in the early days of trade.
At 9:35 am, only three stocks in the Sensex 30 basket were trading higher:
Bharat Electronics (BEL): +0.19%
Titan Company: +0.15%
Maruti Suzuki: +0.03%
The gains were small and were not enough to cover the selling pressure on the whole index.
We are worried about the biggest threat being crude oil, they said.
Rising crude oil prices are still one of the top concerns for Indian equity investors.
Brent crude was up nearly $2.25 a barrel to $88 a barrel as new U.S. warnings on Iran, coupled with increased geopolitical uncertainty, pushed oil prices to higher levels. A rise in oil prices was keeping a risk premium embedded in energy markets, analysts said.
Hariselvan Radhakrishnan, founder and CEO of HST Wealth, said crude oil remained the main concern as Brent remained close to the $88-per-barrel level.
Higher crude prices are especially important for India as a significant portion of its crude oil needs are imported. A sustained increase in oil prices can raise the country's import bill, put pressure on inflation and possibly affect the fiscal and current account outlook.
Ponmudi R, CEO of Enrich Money, said Indian equity markets will remain range-bound but will be cautious with a cautious stance because geopolitical tensions in the Middle East continue to affect investor risk appetite.
Oil prices rise further
International crude prices rose on Monday as hopes for a near-term peace between the US and Iran waned.
Brent crude futures rose about 1 percent to $89.40 a barrel, and West Texas Intermediate crude futures rose 44 cents to $82.83 per barrel.
Both indices have already risen more than 5% since last week and are beginning to show the effects global geopolitics are having on energy markets.
Slower-than-normal tanker traffic on the Strait of Hormuz, a major global oil transportation route, has added to fears about potential disruption to crude supplies.
Rupee falls against US dollar
The Indian rupee weakened in early morning trading on Monday.
The rupee slipped 17 paise against the dollar to ₹95.59 as investors had been cautious about the situation in the market and external issues.
Forex traders were also assessing the Reserve Bank of India’s recent announcement regarding its swap facility for FCNR(B) deposits. The facility will only apply to deposits mobilised through August 31, bringing the earlier September 30 cut-off date forward.
Currency movements are closely watched due to crude oil prices, as a weaker rupee can increase the domestic cost of imported commodities such as crude oil.
Investors remain cautious
The decline follows a bad day in the market on August 14 when Indian benchmark indices also fell. So far, selling in metal, automobile and IT stocks has hurt the market, and geopolitical uncertainty kept investors cautious too.
Market participants are now likely to track crude oil movements, developments in the Middle East, the performance of the rupee and global market cues for further direction.
Investors will be in the market only to see whether the Sensex and Nifty can recover from their early losses as quickly as possible or whether selling pressure increases in the trading session.
In the near term, however, with crude oil prices at high levels and geopolitical uncertainty continuing, analysts expect volatility to remain high.
Disclaimer: This article is not investment advice. Stock prices and market conditions can change quickly. Investors should do their own research and consult a top financial advisor before making investment decisions.
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