Crude Shock Sends Sensex Down 1,000 Points As Markets Near Six-Month Lows

Indian equity benchmark indices fell sharply on Monday, extending their seven-week losing streak and approaching six-month lows as surging crude oil prices, geopolitical uncertainties and weak global cues weighed on investor sentiment.

At around 11:20 am, the Sensex was down 1,028.63 points, or 1.39%, at 72,867.11, while the Nifty declined 324.60 points, or 1.4%, to 22,815.90.

All 16 major sectors were trading in the red, while the Nifty Smallcap 100 and Nifty Midcap 100 indices declined 1.43% each.

The Sensex and Nifty have now declined for seven consecutive weeks, losing nearly 6% during the period, marking one of their longest weekly losing streaks on record.

Crude Oil Surge Hits Sentiment

Brent crude, the global oil benchmark, rose 2.27% to $106.70 per barrel after US President Donald Trump said he had rejected an Iranian proposal to reopen the Strait of Hormuz and end the fighting.

Iran, however, said on Sunday that only diplomacy could resolve its conflict with the US and Israel, according to Reuters.

For India, the world's third-largest crude importer, elevated oil prices pose risks to inflation, the import bill and corporate margins.

FII Selling, Rupee Decline Add Pressure

Foreign Institutional Investors extended their selling for a second consecutive session on Friday, offloading equities worth ₹3,696 crore.

The rupee also weakened against the US dollar, depreciating 20 paise to ₹95.95. The currency opened at ₹95.89 at the interbank foreign exchange market before losing further ground.

The depreciation came as the dollar strengthened and foreign fund outflows continued amid the ongoing West Asia conflict.

Bank Nifty Falls Nearly 2%

Banking stocks came under significant pressure, with the Bank Nifty declining nearly 2%.

At 11:10 am, the sectoral index was down 1.9% at 54,536.65, led by Yes Bank, Union Bank of India and IDFC First Bank, which fell 4%, 3.4% and 2.7%, respectively.

HDFC Bank, State Bank of India and ICICI Bank were down nearly 2% each and featured among the top Nifty losers.

The PSU Bank index declined more than 2%, while the Nifty Private Bank index fell 1.5%.

Elevated bond yields, rising expectations of an RBI rate hike and the possibility of net interest margin compression are creating an overhang for the BFSI sector, while stock-specific concerns continue to affect larger banks.

The India VIX, a measure of expected market volatility, surged 14% to 13.86, signalling increased caution among investors.

Global cues were also weak. South Korea's KOSPI, Japan's Nikkei 225 and Shanghai's SSE Composite traded lower, while Wall Street futures were down as much as 0.07%, pointing to a weak opening for US equities.

External Headwinds Overpower Domestic Tailwinds

V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said the divergence between economic fundamentals and market performance remains notable.

“Two apparently contradictory trends - in the economy and markets - deserve attention. The economy is resilient and corporate earnings are improving, but the market is steadily going down,” Vijayakumar said.

He said external headwinds are currently overpowering domestic tailwinds, with Brent crude at $106 and the US 10-year yield at 5.2% weighing on equities.

“FPIs, after turning buyers in July and August have again turned sellers in September. This scenario will keep the market under pressure in the near-term,” he said.

Vijayakumar also pointed to a divergence in foreign investor activity across market segments. While FPIs are selling large-caps, they continue to buy mid- and small-caps despite their elevated valuations.

According to him, this broader-market momentum is likely to be a short-term phase. The valuation gap between large-caps and mid- and small-caps is unlikely to persist indefinitely, with a mean reversion likely once crude oil prices and US bond yields cool.