Surging oil prices drag Indian shares to weekly losses

Indian stock markets slumped on Friday, marking their weekly decline as escalating oil prices due to Middle East tensions raised concerns about inflation and corporate earnings. The Nifty 50 index slipped 0.39% to 22,600, while the Sensex fell 0.17% to 73,123.83. Over the past week, the indexes experienced declines of 2.4% and 2.2%, respectively.

This downturn was fueled by a rise in Brent crude oil futures to around $114, triggered by fears of energy supply disruptions following attacks on Saudi Arabia, a major oil exporter, by Yemen's Houthis. Rushabh Sheth, co-founder and co-CIO of Karma Capital, noted that oil is an immediate pressure point, while the effects of a weaker monsoon on water availability pose a longer-term risk.

With clear macroeconomic headwinds looming over the coming quarters, the market is expected to narrow, implying fewer stocks will perform well across various sectors.

Demand for Mukesh Ambani's Jio Platforms' record-breaking $3.2 billion IPO, which surged to 13.8 times by the end of the secondary market, also contributed to liquidity drain during the week. According to analysts at SMC Global and Motilal Oswal Financial Services, 15 of the 16 major sectors recorded weekly losses. Notably, small-cap and mid-cap stocks underperformed the benchmarks, witnessing declines of 7.3% and 5.6%, marking their worst weekly performance in 20 months.

Consumer durables, energy, fast-moving consumer goods (FMCG), and automotive sectors were among the hardest hit, losing 6.4%, 4.6%, 4.3%, and 3.5%, respectively, as higher oil prices dampened their earnings outlooks. The largest benchmark stock, HDFC Bank, fell 5% that week after missing quarterly profit estimates, while Axis Bank dropped 5.6% on an earnings miss.

Bajaj Finance also declined 5.4% amid concerns that pressure on lending margins would outweigh any profit gains. On the same day, Swiggy's stock plummeted 16.8% to a record low, reflecting concerns over the company's ability to revitalize its quick-commerce segment and improve margins in its food delivery business. Colgate-Palmolive India also suffered, falling 4.8% after its quarterly profit fell short of expectations.