Sensex, Nifty stumble on geopolitical fears; financials, energy stocks drag

Nifty Bank extended its losing streak for the fifth consecutive session, slipping 0.3 percent as key stocks like ICICI Bank and Kotak Mahindra lagged.

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The domestic equity indices, Sensex and Nifty 50, opened flat on October 4 but quickly slid into negative territory as escalating tensions in the Middle East kept investors on edge ahead of the crucial September US payrolls report. Financial services, oil & gas, and auto stocks led the decline in Nifty, while IT stocks bucked the trend, providing a rare glimmer of strength amidst the broader market slump.

At 9.18 AM, the Sensex was down 236 points or 0.3 percent at 82,260, and the Nifty was down 78 points or 0.3 percent at 25,172. About 1,381 shares advanced, 1,108 shares declined, and 111 shares remained unchanged.

"Indian markets have been experiencing sharp declines followed by quick recoveries. However, due to current geopolitical tensions, there's a new level of scepticism in the market," said Kranthi Bathini, Director of Equity Strategy at WealthMills Securities.

Nifty Bank extended its losing streak for the fifth consecutive session, slipping 0.3 percent as key stocks like ICICI Bank and Kotak Mahindra lagged. Nifty Auto also faced pressure, declining 0.7 percent, with valuation concerns weighing heavily on the sector. Oil and gas stocks remained under pressure for the fourth session in a row, driven by fears of potential Israeli strikes on Iranian oil installations amidst rising Middle East tensions.

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Of the 13 sectoral indices, 12 were in the red. However, Nifty IT emerged as the day's sole outlier, rising 0.3 percent led by gains in TCS, Coforge, and HCLTech. JPMorgan, in its latest research report, raised its target price on Coforge from Rs 6,900 to Rs 9,300 while maintaining an 'Overweight' rating.

"So far, Accenture's results suggest that IT will likely be neutral to positive, with no major negative surprises. But, given global growth concerns and geopolitical issues, volatility will remain high in sectors like IT, banking, and financial services," Bathini told Moneycontrol.

In the broader market, the BSE Midcap and Smallcap indices dropped over 1 percent each, underperforming the benchmarks. Meanwhile, India VIX, often referred to as the fear gauge, increased by nearly 4 percent to 13.7.

Anand James, Chief Market Strategist at Geojit Financial Services, noted that Nifty could pause around the 25,000 mark and a rebound might occur soon. He said that while Nifty's upside potential seems capped at 25,460, there’s a chance it could climb to 25,690. "Alternatively, inability to float above 25300 could quickly pave way for 25,000 or even 24,600," he added.

In the Nifty 50, Cipla, Hero MotoCorp, Trent, Bajaj Finance, and BPCL were the biggest laggards, falling 1-3 percent. On the other hand, IndusInd Bank, Tata Motors, Titan, ONGC, and SBI Life emerged as the top gainers, climbing 1-2 percent.

Also Read | Oil edges up on Middle East conflict but supply outlook limits gains

October kicked off with volatility as the recent missile strike by Iran on Israel sent Indian benchmarks tumbling by over 2 percent in the previous session. The situation intensified as Israel commenced a ground operation in Lebanon. In response to these geopolitical developments, Brent Crude futures have surged over 8 percent so far in October to nearly $78 per barrel driven by fears that Israel may retaliate against Iran's oil industry for the missile attack.

Back home, new rules introduced by the Securities and Exchange Board of India (SEBI) for the F&O segment have raised concerns about lower trading volumes. Apart from that, FIIs are expected to keep selling Indian equities and shift funds to the more affordable Chinese market.

Despite short-term concerns, analysts are of the view that the long-term trend in Indian markets remains intact and that investors with a long-term outlook should use this dip as a buying opportunity.

Asia-Pacific markets traded mixed in morning trade today following overnight losses on Wall Street. Markets in mainland China will reopen on Oct 8.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions