Sensex Drops 400 Points, Nifty Slips Below 23,700 Amid Global Cues, Crude Worries

Indian equity markets opened lower on Tuesday, with elevated crude oil prices, persistent US-Iran tensions and mixed global cues keeping investors cautious.

At 9:30 am, the Sensex was down 407.58 points, or 0.54 percent, at 75,725.23, while the Nifty declined 106.95 points, or 0.45 percent, to 23,672.20.

Market breadth remained mixed, with around 1,524 shares advancing, 1,520 declining and 178 remaining unchanged.

Crude Prices Keep Sentiment Subdued

Rising crude oil prices remained a key concern for domestic investors amid fears of a widening conflict in the Middle East.

Brent crude futures hovered around $97 per barrel, breaking above the range it had held for four sessions as concerns over prolonged supply disruptions linked to tanker attacks and risks around the Strait of Hormuz persisted.

Iran has threatened retaliation against US assets in response to any new attacks on Tehran, warning that energy infrastructure across the Gulf, including US oil and gas interests, could be vulnerable.

OPEC+ has kept output unchanged, leaving limited additional supply buffers.

India remains particularly vulnerable to elevated oil prices as the country imports around 85 percent of its crude oil requirements.

Global Cues Remain Mixed

Asian markets traded mixed on Tuesday, with Japan's Nikkei largely flat while South Korea's Kospi gained more than 0.5 percent.

Analysts expect domestic markets to remain under pressure in the absence of strong local triggers, with investors also tracking global interest-rate expectations and geopolitical developments.

Fifth Week Of Downtrend

V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said the market is now in its fifth week of a gradual downtrend.

“Elevated crude prices, selling in IT stocks, fears of a Fed rate hike this month and a booming IPO market which is sucking lots of money have contributed to this slow grind down in the market,” Vijayakumar said.

He added that the macro factors behind the weakness remain in place, making a continuation of the near-term downtrend possible. However, he said the correction is creating opportunities in large-cap stocks, which remain weak despite improving fundamentals.

According to Vijayakumar, steady monthly SIP inflows are largely moving towards mid- and small-cap segments despite their elevated valuations, contributing to the divergence between large- and smaller-cap stocks.

He expects a mean reversion in mid- and small-caps could eventually facilitate a rally in fundamentally sound large-caps. The timing remains difficult to predict, but he believes such a transition could happen by month-end after the mega IPOs of NSE and Jio are completed and IPO refunds return to investors.

Instead of attempting to time the market, Vijayakumar suggested investors could consider increasing the portfolio weightage towards large-caps where the risk-reward appears favourable.

Nifty Outlook

Anand James, Chief Market Strategist at Geojit Investments, said the Nifty's consolidation in the second half of Monday's session offered some hope for a recovery attempt despite the index slipping to its lowest level since late July.

“However, we will need a confirmation from a break beyond 23860 to signal recovery attempts, while downside marker is placed at 23720,” James said.

He added that the systematic slippage over the past few sessions has made the trend vulnerable, exposing support levels at 23,570 and 23,260.