Indian stocks slip to six-week low as IT slides, oil worries mount

Indian stocks dropped to a six-week low on Monday, influenced by IT shares, as heightened Middle East tensions and expectations of a U.S. rate increase weakened risk appetite. The Nifty 50 closed 0.5% lower at 23,779.15 while the BSE Sensex fell 0.5% to 76,132.81. Over the past four weeks, both indices have declined by 2.7% and 2.5%, respectively, as soaring oil prices and global bond yields impacted equities.

G Chokkalingam, head of research at Equinomics Research, forecasted continued short-term market volatility due to periodic conflicts and higher crude oil prices. Liquidity issues stemming from a surge of IPOs and below-average rainfall may also negatively impact markets despite favorable domestic economic indicators. On Monday, 14 out of 16 major sectors recorded losses.

The IT sub-index declined 2.3%, mirroring broader weakness, as the prospect of a September Federal Reserve rate hike bolstered expectations of reduced client spending for Indian IT firms that receive a significant portion of revenue from the U.S. Meanwhile, Brent crude futures increased 0.6% to $96.8 a barrel following U.S. and Iran clashes near the Strait of Hormuz, potentially disrupting energy supplies and amplifying inflation concerns.

Broad small-cap stocks remained unchanged, while mid-cap stocks fell 0.5%. Individual stocks such as PVR Inox plummeted 6.1% following an internal probe that revealed potential 2 billion rupee kickbacks related to cinema projects, though the company claimed no evidence of wrongdoing. Shares of Zee Entertainment Entertainment fell 6.4% after reports claimed India's top investigative agency filed an FIR against its founder and chairman, Subhash Chandra, and others for allegedly defrauding LIC Housing Finance; Chandra's office has not yet commented on the allegations.