Indian equity markets experienced a sharp correction on Monday, interrupting a brief rally as benchmark indices recorded significant losses. The BSE Sensex plunged by 928 points, or 1.24 percent, to settle at 73,801.07, while the Nifty50 fell by 274 points, or 1.19 percent, to 22,871.80 by mid-afternoon. This broad-based decline resulted in an erosion of approximately Rs 4.68 lakh crore from the combined market capitalisation of BSE-listed firms, bringing the total value down to Rs 468 lakh crore.
The primary catalyst for the downturn was the performance of major private sector lenders. Shares of Axis Bank saw a decline of more than 5 percent after the bank’s second-quarter profit of Rs 7,003 crore—a 38 percent year-on-year increase—fell short of analyst expectations. Similarly, HDFC Bank witnessed selling pressure, with its stock dropping over 2 percent following its report of a 4.6 percent rise in quarterly net profit. Other banking stocks, including ICICI Bank and Yes Bank, also faced downward pressure, contributing to the negative sentiment on the trading floor.
Market analysts pointed to a combination of internal and external factors driving the volatility. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, noted that while the recent 2.8 percent surge in the Nifty and strong IT sector results provided some resilience, the escalation of tensions in the Hormuz region and the subsequent rise in Brent crude prices to $109 per barrel present significant headwinds. High oil prices remain a persistent concern for the Indian economy, complicating the outlook for foreign institutional investors (FIIs), who have been net sellers in nine of the 11 trading sessions this month.
The domestic market also mirrored a wider trend of weakness across global exchanges. On Friday, U.S. markets saw a sharp sell-off, with the Nasdaq dropping more than 2 percent and the S&P 500 declining by over 1 percent. Regional markets followed suit, as Japan’s Nikkei slipped 0.64 percent and the Jakarta Composite plunged by more than 5 percent. In contrast, South Korea’s Kospi bucked the trend by rising 2 percent, driven by a resurgence in demand for AI-related stocks, a sector that historically sees varying impact on Indian equities.
Profit-booking by domestic investors acted as an additional pressure point on Monday. Following a rally that saw the Nifty gain more than 2 percent over the previous Thursday and Friday, many participants sought to secure their recent earnings. This tendency to lock in gains is compounded by anticipation of volatility ahead of the upcoming Nifty expiry and a scheduled market holiday on Tuesday.
Despite the prevailing gloom, some stocks demonstrated relative strength. Adani Ports and Maruti Suzuki managed to move against the broader trend, gaining as much as 2 percent each. Looking ahead, market observers anticipate that trading this week will remain highly stock-specific, as investors continue to react to the ongoing release of second-quarter corporate results. While the appreciation of the rupee and attractive valuations of large-cap stocks have occasionally bolstered market sentiment, analysts remain cautious about the sustainability of these gains given the current macroeconomic backdrop.
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