Banking stocks, stronger rupee cushion losses; elevated oil prices, Middle East tensions and FII selling keep sentiment under pressure
By Our Business Correspondent
Indian equity benchmarks extended their losing streak to a fifth consecutive session on Friday, although a sharp pullback in global crude oil prices from intraday highs helped the market recover significantly from the day’s lows. Investors took advantage of lower valuations after recent declines, while gains in banking stocks and a modest appreciation in the rupee provided additional support. However, persistent concerns over geopolitical tensions in the Middle East, elevated energy prices, weak global cues and continued foreign institutional investor (FII) outflows prevented a meaningful rebound.
The benchmark BSE Sensex closed 331.62 points, or 0.43 per cent, lower at 76,059.77, while the NSE Nifty 50 ended down 102.15 points, or 0.43 per cent, at 23,767.45, slipping below the psychologically important 23,800 level. The latest decline marked the fifth straight day of losses for domestic equities, with the Sensex falling 2.67 per cent and the Nifty declining 2.32 per cent during the period.
The indices had opened on a weak note following overnight losses on Wall Street and surging crude oil prices. During the session, the Nifty dropped to an intraday low of 23,606.30 before recovering sharply as Brent crude retreated below the $100-a-barrel mark after briefly crossing that level earlier in the day.
Crude Oil Remains Key Market Driver
Volatility in international crude oil prices remained the dominant theme for financial markets. Brent crude futures for September 2026 delivery fell by $3.21, or 3.19 per cent, to $97.48 per barrel after touching levels above $100 earlier in the session.
Although the decline offered temporary relief, market participants remained cautious as oil prices continue to hover near multi-month highs amid escalating geopolitical tensions in the Middle East. Investors fear that prolonged disruptions to global energy supplies could push inflation higher, raise input costs for businesses and complicate the monetary policy outlook.
Recent attacks by Iran-backed Houthi militants on Saudi oil tankers in the Red Sea, coupled with Iran’s near closure of the Strait of Hormuz, have heightened concerns about disruptions to one of the world’s busiest energy corridors. Oil prices have reportedly surged nearly 40 per cent this month as geopolitical risks intensified.
The geopolitical situation remains fluid, with continued US air strikes on Iran and retaliatory actions by Tehran against neighbouring countries hosting American military facilities keeping global investors on edge.
Banking Stocks Limit Market Decline
Despite the overall weakness, buying interest emerged in banking counters, helping benchmark indices recover from their lowest levels. Value buying also resurfaced after the recent correction, suggesting investors selectively accumulated fundamentally strong stocks at lower valuations.
The Indian rupee strengthened modestly against the US dollar, improving overall market sentiment. The partially convertible rupee traded around 96.56 per dollar, compared with the previous close of 96.73.
Government bond yields also eased slightly, with the yield on the benchmark 10-year government security declining to 6.828 per cent, indicating stable domestic debt market conditions despite heightened global uncertainty.
Meanwhile, the India VIX, which measures expected market volatility, rose 4.11 per cent to 14.03, reflecting increased investor nervousness.
Broader Markets Display Relative Resilience
The broader market performed relatively better than frontline indices, although gains remained limited. The BSE MidCap Index declined 0.16 per cent, while the SmallCap Index slipped 0.23 per cent, indicating that selling pressure was not as severe outside large-cap stocks.
Market breadth, however, remained positive. On the National Stock Exchange, 1,703 stocks advanced, compared with 1,596 declines, while 126 stocks remained unchanged, suggesting selective buying across sectors despite weak benchmark performance.
Auto, metal and oil & gas stocks were among the biggest laggards as investors factored in the implications of higher commodity prices and uncertain global demand.
Economic Data Signals Moderation in Growth
Fresh macroeconomic data added another layer of caution for investors.
According to the HSBC Flash India PMI survey, compiled by S&P Global, India’s private sector activity expanded at its slowest pace in more than four years during July as softer demand and rising inflationary pressures weighed on business activity.
The HSBC Flash Composite PMI Output Index eased to 54.3 in July from 57.1 in June, marking the weakest expansion since March 2022.
The slowdown was driven largely by the services sector. The Services PMI Business Activity Index declined sharply to 53.1, its lowest level since February 2022, compared with 57.4 in June.
Manufacturing, however, remained comparatively resilient. The Manufacturing PMI Output Index improved to 57.0 from 56.3, although the headline Manufacturing PMI edged slightly lower to 53.9 from 54.2.
The data indicate that while India’s manufacturing sector continues to support overall economic activity, weakening demand in services and rising cost pressures could temper growth momentum in the coming months.
Global Markets Remain Volatile
International markets continued to reflect heightened uncertainty arising from geopolitical risks, inflation concerns and shifting monetary policy expectations.
Asian markets largely ended lower after Japan reported higher inflation figures, reinforcing expectations that the Bank of Japan could continue gradually tightening monetary policy.
European markets, however, traded in positive territory after official data showed UK retail sales rose 1 per cent in June, supported by stronger consumer spending on seasonal goods and additional demand linked to the FIFA World Cup.
US equity futures pointed to a firmer opening, with Dow Jones futures rising over 230 points, offering some optimism after Thursday’s sharp sell-off.
Overnight, Wall Street witnessed heavy declines as investors reacted to surging oil prices, disappointing earnings from major technology companies and escalating geopolitical tensions.
The Dow Jones Industrial Average fell 506.93 points, while the S&P 500 lost 1.21 per cent and the Nasdaq Composite slumped 2.15 per cent. Technology stocks led the decline, with Alphabet dropping 7 per cent and Tesla tumbling 14 per cent following their quarterly earnings announcements.
Investor confidence was also affected by higher US import tariffs imposed on several trading partners, raising fears of renewed inflationary pressures. Consequently, US Treasury yields remained elevated, while European bond yields climbed to multi-year highs.
Earnings Drive Stock-Specific Action
Corporate earnings continued to dictate stock-specific movements across sectors.
Infosys declined after reporting lower sequential profits despite revenue growth, with management highlighting cautious client spending amid geopolitical uncertainty. The company nevertheless reported strong demand for artificial intelligence-related projects and announced nearly $1 billion in large deal wins during the quarter.
Among gainers, Laurus Labs, Wendt, Atul, Indian Energy Exchange (IEX), Thyrocare Technologies, Allied Blenders & Distillers and APAR Industries advanced after posting healthy quarterly earnings, reflecting resilience across pharmaceuticals, healthcare, specialty chemicals and industrial manufacturing.
On the losing side, Motilal Oswal Financial Services, Route Mobile, Fractal Analytics and Meesho came under pressure following their quarterly results despite reporting improvements in certain operational metrics.
New Listing and IPO Activity
Primary market activity remained active despite volatility in secondary markets.
Caliber Mining and Logistics delivered a strong stock market debut, ending its first trading session at Rs 528.50, representing a premium of 24.65 per cent over its issue price of Rs 424. The stock witnessed robust investor participation, with more than 21.6 lakh shares changing hands during the session.
Among ongoing public issues, INDO-MIM received the strongest investor response with subscriptions exceeding three times the shares on offer. Xtranet Technologies also attracted healthy demand, while Lohia Corp remained undersubscribed at the close of bidding.
Outlook
Market participants are expected to remain focused on developments in crude oil prices, geopolitical tensions in the Middle East, foreign institutional investment trends and the ongoing corporate earnings season.
Analysts believe volatility is likely to persist in the near term as investors assess the inflationary impact of higher energy prices alongside slowing global growth indicators. While bargain hunting could continue after recent corrections, sustained recovery in domestic equities may depend on stability in crude oil prices, easing geopolitical risks and renewed institutional buying.
Disclaimer: This report is based solely on the information provided in the source material shared by the user. Figures, market data, company results and geopolitical developments have been retained from the source and have not been independently verified.