Sensex Drops 383 Points, Nifty Slips Below 23,800 Amid Crude, US-Iran Tensions

The benchmark Sensex and Nifty ended lower on Monday as elevated crude oil prices, escalating US-Iran hostilities and concerns over a possible US interest rate hike weighed on investor sentiment.

The Sensex settled 382.62 points, or 0.5 percent, lower at 76,132.81, while the Nifty declined 118.55 points, or 0.5 percent, to 23,779.15.

Broader markets also remained under pressure, with small-cap and mid-cap stocks falling around 0.2 percent each as rising crude prices and geopolitical tensions dented risk appetite.

Brent crude, the global oil benchmark, traded 0.78 percent higher at $97 per barrel, keeping investors cautious over the potential impact of higher input and transportation costs.

Escalating US-Iran tensions also remained a key overhang for domestic equities, with developments around the Strait of Hormuz continuing to influence sentiment.

Global Cues Remain Mixed

Asian markets delivered mixed signals on Monday. South Korea's Kospi jumped 3.36 percent, while Japan's Nikkei 225 gained 1.83 percent. However, Shanghai's SSE Composite and Hong Kong's Hang Seng were trading lower.

US markets had ended in negative territory on Friday, adding to caution among domestic investors.

Foreign institutional investors remained net sellers for a second consecutive session, offloading equities worth ₹3,111.94 crore on Friday.

Continued foreign outflows have added pressure to Indian equities, particularly large-cap stocks, amid broader concerns over global interest rates and geopolitical risks.

India VIX Rises, IT Stocks Drag

The India VIX, or fear gauge, rose more than 3 percent to around 11 levels, signalling increased expectations of market volatility and greater caution among investors.

A rise in the volatility index typically reflects heightened uncertainty in the market as investors assess near-term risks.

IT stocks came under sharp selling pressure on Monday, declining nearly 3 percent, with Infosys and Tata Consultancy Services among the major laggards.

The Nifty IT index fell around 2 percent after stronger-than-expected US jobs growth data boosted expectations of a September interest rate hike by the US Federal Reserve.

Higher US interest rates could potentially curb client spending, weighing on Indian IT companies that generate a significant share of their revenue from the US market.

Broader Rally Faces Risks

Vinod Nair, Head of Research at Geojit Investments, said domestic benchmarks and large-cap stocks remain sensitive to developments around the Strait of Hormuz, while the broader market continues to show divergence.

“Domestic main benchmark indices and large-cap stocks remain influenced by developments in the Strait of Hormuz, while the broader market shows a clear divergence, with small-caps and select mid-caps rally backed by stronger earnings,” Nair said.

He added that value buying has gained traction following the late-2025 and early-2026 sell-off, with valuations appearing attractive as corporate earnings move from downgrades towards upgrades.

However, Nair cautioned that the broader market rally is becoming stretched, increasing vulnerability to supply-chain disruptions and weaker high-frequency macroeconomic indicators.

He said higher input costs had limited impact on Q1 corporate earnings because of stronger consumer demand and tax reduction gains, which supported product and service price increases. Going forward, the fading of these supportive factors could weaken earnings expectations and increase the vulnerability of the broader market rally.