Sensex Drops 335 Points, Nifty Below 23,700 as Crude Prices, Global Tensions Hit Markets

Domestic equity markets opened lower on Tuesday, September 8, as rising crude oil prices, geopolitical tensions and expectations of a possible US Federal Reserve rate hike kept investors cautious.

At 9:16 am, the BSE Sensex was down 335 points, or 0.44%, at 75,797.59, while the NSE Nifty declined 0.36% to 23,694.60, slipping below the 23,700 mark.

The broader market showed relative resilience. The Nifty Midcap 100 declined 0.12%, while the Nifty Smallcap 100 edged up 0.05%. The Nifty Microcap 250 gained 0.39%, indicating that investors continued to show interest in smaller stocks despite weakness in the benchmark indices.

Among sectoral indices, Nifty Metal gained 0.24%, while Chemicals rose 0.15%. On the losing side, Oil & Gas declined 0.48%, Financial Services fell 0.41% and Private Bank slipped 0.39%. IT, Auto, FMCG and PSU Bank stocks also traded lower.

Crude Oil Prices Rise

Market sentiment remained subdued as crude oil prices climbed for a third consecutive session. Brent crude was trading around $97 a barrel after hitting a six-week high on Monday.

Oil prices rose following fresh threats from Iran to target energy infrastructure in the Gulf if further attacks occur. Higher crude prices are a concern for India, which imports a significant portion of its oil requirements. A sustained rise in crude prices could increase inflationary pressures, weaken the rupee and squeeze corporate profit margins.

Global Market Cues

Asian markets traded mixed. Japan’s Nikkei gained around 0.2%, while South Korea’s KOSPI rose 1.2%. Australia’s benchmark index, however, declined 0.6%.

US stock futures were slightly lower after Wall Street remained closed on Monday for the Labor Day holiday.

The US 10-year Treasury yield stood at around 4.79%, while markets continued to price in roughly a 60% probability of a 25-basis-point Federal Reserve rate hike at its September 16 meeting.

Large-Caps May Offer Opportunities

V K Vijayakumar, chief investment strategist at Geojit Investments, said the Indian market has entered its fifth week of a slow and steady downtrend.

He attributed the weakness to elevated crude prices, continued selling in IT stocks, expectations of a Fed rate hike this month and a strong IPO pipeline that is absorbing substantial market liquidity.

According to Vijayakumar, the macroeconomic factors behind the current weakness remain in place, suggesting that the downtrend could continue in the near term. However, he said the correction is creating opportunities in large-cap stocks, which remain weak despite improving fundamentals.

Vijayakumar also said large-caps have been under pressure partly because a significant portion of monthly SIP inflows continues to move towards mid- and small-cap stocks, despite their elevated valuations.

He expects a mean reversion in the mid- and small-cap segments could eventually support a rally in fundamentally strong large-cap stocks. While the timing of such a shift is difficult to predict, he expects it could occur by the end of September, once the mega IPOs of NSE and Jio are completed and IPO refunds return money to investors.

“Instead of trying to time the market, investors can think about changing the weightage of portfolios towards large-caps where the risk-reward is favourable,” Vijayakumar said.

Nifty Technical View

Ponmudi R, CEO of Enrich Money, said the Nifty is likely to remain under pressure as the index continues to trade in a weak technical setup after closing below 23,800 in the previous session.

He said a sustained move above 24,000 would be crucial for a revival in upward momentum. A decisive breakout above 24,200, meanwhile, could strengthen the bullish outlook and open the path for further gains.

On the downside, the 23,750-23,700 range is the immediate support zone, while 23,600 remains a more critical level. A break below this support could expose the index to deeper losses.

Overall, the near-term technical outlook for the Nifty remains cautious to bearish.