Indian shares decline as higher crude prices dent sentiment
Indian share benchmarks fell on Tuesday, with heavyweight financials leading the decline, as elevated crude prices hurt sentiment, offsetting support from a strong quarterly earnings season and renewed foreign buying. The Nifty fell 0.46% to 24,471.70 and the BSE Sensex lost 0.49% to 78,154.25. The 50-stock Nifty was 0.54% lower before the closing auction system kicked in. The narrower difference…
Indian stock markets experienced a decline on Tuesday, with major financial firms driving the decrease, as surging crude prices dampened investor sentiment. Despite the positive impact of strong quarterly earnings and renewed foreign investment, the negative effects of elevated crude prices outweighed them. The Nifty index fell by 0.46%, settling at 24,471.70, while the BSE Sensex dropped by 0.49%, closing at 78,154.25.
The Nifty index dipped 0.54% before the official closing auction process began, marking a stark contrast to the previous Tuesday's significant fluctuation, which occurred on a weekly contract expiry day.
Many sectors within the Indian market saw declines, with ten out of the 16 major sectors experiencing losses. Small-cap stocks managed to rise by 0.2%, while mid-cap stocks remained relatively stable. However, the broader small-cap segment saw an increase, whereas mid-cap stocks settled flat.
High crude oil prices, which reached $90 per barrel on Tuesday – the highest level since July 31 – presented a significant issue for India, which is the world's third-largest importer of crude oil. This situation further exacerbated the vulnerability of financial markets. Dhananjay Sinha, CEO and co-head of equities and head of research at Systematix Group, highlighted that sustained increases in crude prices at this time could have a substantial impact on the overall economy and foreign inflows, thereby putting the markets at greater risk.
Consumer companies, whose primary raw material is crude oil, saw a decline of 1.2%, with 13 out of the 15 companies in this sector experiencing a loss. Heavyweight banks and private banks also faced a drop, with banks losing 0.4% and private banks falling 0.6% respectively. The financial sector was affected, with financials dropping by 0.4%.
Foreign investors have been buying Indian shares worth $1.5 billion on a net basis in August, following a $2.1 billion inflow in July. Nevertheless, they have offloaded a record $25.7 billion worth of shares so far this year. Among individual stocks, Gland Pharma surged by 9.6% after surpassing analyst expectations in its first-quarter earnings, while media firm Zee Entertainment fell by 3% due to a profit decline in the June quarter.
Construction company Dilip Buildcon experienced a 4.9% decline after its June quarter profit fell by half compared to the previous year.
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