Sensex, Nifty Drop for Fifth Consecutive Session Amid Middle East Tension

The Sensex and Nifty closed in the red for the fifth straight session on October 4, as rising tensions in the Middle East rattled investor confidence. Fears of potential disruptions to oil supplies from the region, a key global producer, pushed crude prices higher, creating concern for net importers like India.

At market close, the Sensex fell by 808 points or 1% to settle at 81,688, while the Nifty dropped by 200 points or 0.8% to 25,049. This marked the biggest weekly drop for both indices since June 2022, with the Nifty down 4.3% and the Sensex slipping 4.5% this week. Out of the traded shares, 1,521 advanced, 2,266 declined, and 101 remained unchanged.

The spike in oil prices, driven by geopolitical unrest, has had a major impact on markets. Brent crude futures have surged over 9% in October, crossing $78 per barrel, amplifying concerns for India, a significant net importer of oil.

Adding to the pressure, Foreign Institutional Investors (FIIs) have been pulling out funds from Indian markets, redirecting them to China in response to its recent stimulus measures. Over the last three days alone, FIIs have sold approximately Rs 30,614 crores in the cash market. China-dedicated funds have attracted over $13 billion in inflows, while India-dedicated funds have only seen $107 million, according to Cameron Brandt, Director of Research at EPFR Global, speaking with CNBC-TV18.

“The past three days have seen significant FII selling, totaling Rs 30,614 crores in the cash market. FIIs are shifting funds from pricey Indian markets to cheaper ones like Hong Kong, anticipating that China’s fiscal and monetary stimulus will boost its economy and corporate earnings,” noted V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, told Moneycontrol that global growth concerns and geopolitical uncertainties would likely keep volatility elevated in sectors such as IT and financial services.

Among sector indices, Nifty Bank and Nifty FMCG extended their losing streak to a fifth consecutive session, falling 0.6% and 1.6%, respectively. ICICI Bank and HDFC Bank led the decline in the banking sector, while heavyweights like ITC and Hindustan Unilever dragged down the FMCG index.

In contrast to the broader market, the Nifty IT index rose by 0.5%, driven by gains in Infosys and Tech Mahindra. Indian IT companies are preparing to report their September quarter earnings, with analysts expecting neutral to positive results, especially after Accenture’s performance set an optimistic tone.

Despite the ongoing challenges, many market analysts remain positive about India’s long-term growth prospects. Anirudh Garg, Partner and Fund Manager at Invasset PMS, expressed optimism that FIIs may eventually return to Indian markets, drawn by higher yields and the country’s strong economic growth story compared to developed economies.

In the broader market, both the BSE small-cap and mid-cap indices dropped nearly 1% each, reflecting the heightened risk sentiment. Additionally, the India VIX, which measures market volatility, surged by over 7% to reach 14.

Among Nifty 50 stocks, M&M, Bajaj Finance, Asian Paints, Nestle, and BPCL were the worst performers, shedding between 2-4%. Meanwhile, Infosys, ONGC, HDFC Life, Tata Motors, and Wipro emerged as the top gainers, rising between 0.7-1.5%.

Investors are now turning their attention to the upcoming US nonfarm payrolls report for September, which is expected to provide further insight into the global economic outlook.