Stock market today: Stock market benchmarks, the Sensex and the Nifty 50, suffered significant losses in morning deals on Monday, 20 July, amid weak global cues due to escalating US-Iran tensions.
The Sensex crashed over 700 points, or nearly 1%, to an intraday low of 77,445, while the Nifty 50 declined over 180 points, or almost 1%, to an intraday low of 24,150.
However, the mid and small-cap segments remained resilient. The Nifty Midcap 100 index climbed 0.20%, while the Smallcap 100 index rose by 0.30% during the session.
Why is the Indian stock market falling?
Let’s take a look at five key factors that are driving the domestic stock market down:
1. Profit booking in banking, financial stocks
Strong profit booking in banking and financial heavyweights is the main factor why the Indian stock market is falling today.
HDFC Bank, Axis Bank, and Kotak Mahindra Bank were the top three drags on the Sensex index around 10 AM.
Shares of Axis Bank crashed 6%, while those of HDFC Bank declined over 5% during the session. Kotak Mahindra Bank’s share price dropped 3.5% in the morning trade.
Among the sectoral indices, Bank Nifty crashed 1.6%, while the Financial Services index plunged 2%
The strong decline in banking and financial stocks followed the Q1 results of some banking heavyweights over the weekend.
Experts highlighted that Q1 margins of some heavyweights failed to meet expectations. Moreover, their margins may remain under pressure for the next few quarters, as the RBI may raise interest rates in the near future due to rising crude oil prices and increased inflationary pressures.
“The margin pressure in select banks is weighing on market sentiment. While deposit growth has improved, margins have not expanded along the expected lines. That is what’s affecting sentiment. The market is also anticipating rate hikes, and there are concerns that margin pressure may continue. That’s why investors are booking profits,” Ajit Mishra, SVP of Research at Religare Broking, noted.
2. Weak global cues
Weak global cues amid escalating US-Iran tensions further weighed on sentiment. Asian markets traded lower, with South Korea’s Kospi crashing 5% during the session, while oil prices climbed to their highest level in more than a month amid heightened tensions between the US and Iran.
The US strikes on Iran continued for the ninth consecutive night, even as US Secretary of State Marco Rubio on Sunday (local time) said that Washington remains open to a diplomatic solution with Tehran.
The Middle East conflict is weighing on global market sentiment, as investors worry that its macroeconomic fallout could linger even after the war ends.
3. Crude oil prices back above $90
Brent crude September futures jumped more than 2% to trade above the $90 per barrel level, as the US and Iran intensified their attacks in the Middle East, raising concerns over energy supplies through the Strait of Hormuz.
Rising crude oil prices have revived concerns of an inflation flare-up, which could drive the central bank to raise rates. Moreover, elevated crude oil prices can strain India’s fiscal position as the country is the world’s third-largest importer of crude oil.
“Brent crude spiking above $90 is the strongest headwind. If this trend continues, India’s vulnerability to energy shock will resurface with negative implications for the rupee and FPI flows,” VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.
4. Rupee gets closer to record low levels
The Indian rupee declined about 0.2% to 96.4575 per dollar intraday on Monday, getting closer to the record low of 96.9650 touched in late May. Experts believe the rupee may weaken further amid a spike in crude oil prices.
A weak rupee is negative for the market, as it exacerbates foreign capital outflows.
5. FPIs hit the sell button again
Foreign portfolio investors (FPIs) offloaded Indian equities worth ₹9,120 crore in the cash segment during last week (13-17 July), according to exchange data.
While FPI flows have tapered recently due to the weakening of the AI and chip trade, higher oil prices and a weakening rupee amid the Middle East conflict could prompt foreign investors to sell Indian stocks aggressively.
“Banking and IT stocks account for a significant portion of FPI portfolios. So, if there is selling pressure from FPIs, these sectors are likely to be hit first. If you look at the cash market, FPIs have been net sellers for the last three to four consecutive sessions. They have turned sellers again, mainly due to rising geopolitical tensions and crude oil prices moving higher once again,” Mishra noted.
Nifty 50 technical outlook
According to Rajesh Palviya, the head of research at Axis Direct, the trend remains constructive as long as the Nifty sustains above the 24,200 mark. However, a breach below this level could trigger a decline towards 24,000, followed by 23,800.
Palviya believes that on the upside, 24,450 remains the immediate resistance, while a decisive move above it could pave the way for 24,600–24,700.
“The overall bias remains cautiously optimistic, although crude oil prices and developments in the Middle East will continue to dictate near-term market sentiment. Any moderation in geopolitical tensions and energy prices could provide the catalyst for the next leg of the market’s upward move,” said Palviya.
Shrikant Chouhan, the head of equity research at Kotak Securities, believes that 24,000 (20-day SMA) and 24,200 will be the key trend-deciding levels for positional traders.
“As long as the market trades above these levels, the bullish sentiment is likely to remain intact, with the potential to extend the rally towards 24,500-24,600. However, a move below 24,200 could weaken sentiment, and traders should consider reducing long positions in such a scenario,” said Chouhan.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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