Indian equities snapped a three-session winning streak on Tuesday as escalating geopolitical tensions in West Asia, rising crude oil prices and concerns over inflation triggered broad-based selling. Banking, financial and auto stocks led the decline, while pharmaceutical and metal shares bucked the trend.
The Sensex fell 561.01 points, or 0.72 percent, to close at 77,054.94, while the Nifty 50 declined 159.10 points, or 0.66 percent, to end at 24,052.05.
The broader market also remained under pressure. The Nifty Midcap 100 slipped 0.44 percent and the Nifty Smallcap 100 lost 1 percent.
Selling was widespread across sectors, with 39 of the 50 Nifty stocks ending in the red. HCL Technologies, Shriram Finance and HDFC Life were among the biggest losers.
Among sectoral indices:
Nifty Bank fell 1.15 percent
Nifty Financial Services declined 1.12 percent
Nifty Realty dropped nearly 2 percent
Nifty PSU Bank and Auto indices also lost up to 2 percent
Nifty IT weakened about 1 percent
In contrast, the Pharma and Metal indices ended with modest gains.
The Indian rupee also came under heavy pressure, weakening by 57 paise to close at 96.25 against the US dollar.
Investor sentiment deteriorated as the conflict involving the US and Iran escalated further. Reports of continued US military strikes, renewed tensions around the Strait of Hormuz and fresh attacks involving Houthi rebels raised fears of wider regional instability.
The possibility of prolonged disruptions to global energy supplies prompted investors to reduce exposure to risk assets.
Brent crude surged above $86 a barrel, raising concerns over India's inflation outlook and external balances.
As India imports nearly 85-90 percent of its crude oil requirement, sustained high oil prices could increase import costs, widen the current account deficit, weaken the rupee and add pressure on inflation.
Higher fuel prices also threaten corporate profit margins and consumer spending, making investors cautious.
Markets were also unsettled after India's retail inflation accelerated to 4.38 percent in June, moving above the Reserve Bank of India's 4 percent target for the first time since January 2025.
Higher food and fuel prices have revived concerns that the central bank may adopt a more cautious stance on interest rates if inflation remains elevated in the coming months.
India's merchandise trade deficit widened to a five-month high of $30.43 billion in June as imports grew faster than exports, reflecting the impact of higher commodity prices.
The widening trade gap, coupled with the sharp fall in the rupee and rising US bond yields, has raised concerns over foreign capital flows and India's external sector.
Investors also remained cautious ahead of the June-quarter earnings season. Management commentary on demand, margins and the impact of rising commodity costs is expected to determine market direction over the coming weeks. Higher crude prices and geopolitical uncertainty have already prompted concerns that earnings recovery could be delayed.
Technically, the Nifty continues to hold above the key support zone around 23,950-24,000. A sustained break below 24,000 could trigger further weakness towards the 23,800-23,750 region. On the upside, reclaiming 24,150 may open the way for a move towards 24,250-24,350.
Sensex: 77,054.94 (-561.01, -0.72%)
Nifty 50: 24,052.05 (-159.10, -0.66%)
Nifty Bank: -1.15%
Nifty Financial Services: -1.12%
Nifty Midcap 100: -0.44%
Nifty Smallcap 100: -1.00%
Brent crude: Above $86 per barrel
Rupee: 96.25 per US dollar (-57 paise)