Mumbai, Aug 18: Indian stock markets came under pressure in early trading on Tuesday as crude oil prices climbed above $91 a barrel, reviving concerns about inflation, corporate costs and the impact of renewed tensions between the United States and Iran.
The Sensex fell 365 points, or 0.47 per cent, to 77,362, touching an intraday low, while the Nifty 50 declined 76 points, or 0.31 per cent, to 24,211.
The selling was led by technology stocks, with the Nifty IT index falling more than 1 per cent. The Nifty MidSmall IT & Telecom index declined 0.62 per cent, while the Realty index slipped 0.40 per cent. Financial services, private banks, media, metals and FMCG stocks also traded lower.
There were pockets of strength in the market. The Nifty Auto index gained 0.40 per cent, while PSU Bank stocks rose 0.29 per cent, showing that investors were still finding opportunities in selected sectors despite the broader weakness.
The immediate concern for investors is the sharp rise in crude oil prices. Brent crude, the international benchmark, gained 0.60 per cent to trade above $91 a barrel, while US West Texas Intermediate crude rose more than 1 per cent to $85.37 a barrel.
The rise came as hopes of an extension of the US-Iran ceasefire faded. Reports that Iran could take a more offensive position, along with US President Donald Trump’s decision not to extend the ceasefire, have increased fears of further disruption to energy supplies.
For India, higher crude prices are particularly important because the country relies heavily on imported oil. A sustained rise in crude can increase the import bill, put pressure on the rupee and add to inflation. Companies that depend heavily on fuel, transportation or petroleum-based raw materials could also see their costs rise.
Investors are also keeping an eye on US bond yields. The 10-year US Treasury yield has risen to 4.73 per cent, making US fixed-income assets more attractive and potentially putting pressure on foreign investment flows into emerging markets such as India.
The combination of expensive oil, higher US yields and geopolitical uncertainty is therefore creating a difficult short-term environment for equities.
Still, the market’s underlying domestic picture offers some comfort. India’s economy remains relatively resilient, while early signs of a recovery in corporate earnings could provide support to stocks. Strong buying capacity among domestic institutional investors may also help absorb some of the selling pressure.
Retail investors could similarly view market declines as an opportunity to gradually accumulate fundamentally strong companies for the long term, although near-term volatility is likely to remain high.
The key question for the market now is whether the rise in crude oil prices will be temporary or prolonged. If tensions ease and oil prices fall, some of the current pressure could quickly disappear. But if the geopolitical situation deteriorates and energy supplies are disrupted, higher oil prices could put greater pressure on inflation, corporate earnings and the rupee.
For now, investors are likely to remain cautious, with crude oil prices, developments in the US-Iran conflict, US Treasury yields and foreign investor flows expected to remain the major drivers of market sentiment.
Indian equities are therefore facing a familiar but important challenge: a strong domestic economy is providing a cushion, but an extended oil shock could make the road ahead significantly more volatile.