Indian equity benchmarks muted as elevated oil, Fed in focus

Indian stock markets showed little movement on Tuesday as investors remained cautious due to high oil prices and expectations of the Federal Reserve's policy decision. The Nifty 50 index slipped 0.02% to 22,749.75, while the Sensex declined 0.01% to 73,598.67. Brent crude oil hovered around $116 per barrel, near a six-month high, following attacks on Saudi Arabia and concerns over regional tensions.

Small and mid-cap stocks, however, experienced gains of 2.7% and 1%, respectively, buoyed by strong performances from Sona, Ather Energy, Mankind Pharma, and increased investments in defense stocks following a $22 billion acquisition proposal approval. Twelve of the 16 major sectors recorded gains. Investors are closely monitoring the Federal Reserve, set to maintain interest rates steady on Wednesday before resuming rate hikes in December to combat inflation.

Thomas Priju, a portfolio manager at Karma Capital, cautioned that a hawkish Fed stance could heighten global financial strain, impact emerging markets and lead to volatility. Since the start of 2026, the Nifty 50 has dropped approximately 13%, on track for its worst year since the early 2010s, as record foreign outflows have been driven by escalating oil prices due to the Middle East conflict and the absence of significant AI-related investments.

India's heavy reliance on crude imports makes it particularly susceptible to rising oil prices, which exacerbate inflation, affect fiscal health, and hamper corporate profitability. Financial and IT companies declined by 0.6% and 0.3%, while automobile and pharma stocks saw rises of 1.5% and 1.9%. Tata Consumer Products, benefiting from a stronger-than-expected Q2 profit report, gained 6.8%, driven by sustained demand for its packaged food and beverage products as the company expands its portfolio beyond conventional tea and salt offerings.