The Indian stock market showed a reversal of its two-day upward trend, declining by almost one percent during Monday's trading. The fall was attributed to persistently high oil prices and increased selling in large private bank stocks following the release of quarterly results.
The BSE Sensex barometer dropped by 765 points, which is 1.02 percent, reaching the level of 73,964. Consequently, the NSE Nifty 50 index lost 224 points or 0.97 percent, closing at 22,923 during the day. The overall market sentiment remained weak, as the Nifty Midcap and Nifty Smallcap 100 indices fell by 0.65 percent and 0.75 percent, respectively, indicating a sell-off across the market.
Reasons for the Decline in the Indian Stock Market
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the escalation of tensions in the Strait of Hormuz and the subsequent rise in Brent crude oil prices to $109 would serve as a strong brake on the market. He added that despite the attractive valuation of large companies and the strengthening rupee, positive foreign investor (FII) sentiment is unlikely to persist due to the high cost of crude oil.
There are four main reasons explaining the sell-off in the stock market:
Banking Sector Experienced a Downturn
Major private banks in India, such as HDFC Bank, ICICI Bank, and Axis Bank, became the main drag on the index on Dalal Street after announcing their September quarter results. These three companies collectively accounted for over 50 percent of the sales in the Sensex.
Although analysts remained optimistic about HDFC Bank shares due to better-than-expected results, they predict short-term pressure until a replacement for DMD Kaizad Bharucha is appointed. Clarity regarding new appointments and changes in top management will be crucial to watch. HDFC Bank shares fell by almost 3 percent.
Meanwhile, mixed results from Axis Bank led to missing targets in the second quarter. Elara Capital pointed out that this lender lagged behind its competitors on key fundamental metrics, triggering a 5 percent drop. Overall, the private bank index also declined by 1.7 percent on that day.
FPI Selling Reaches Six-Month High
Selling by Foreign Portfolio Investors (FPIs) reached a six-month high in October, linked to the continued impact of high crude oil prices. Total sales for the month amounted to 52,100 crore rupees, making it the third largest of the year after 60,847 crore rupees sold in April.
According to media reports, Finance Minister Nirmala Sitharaman identified capital outflow as one of the biggest risks for India in 2027 amid excess market liquidity. In this year, FPIs sold a record 3.12 trillion rupees.
Oil Prices Remain High
Despite a 2 percent decline during the day, oil prices remain elevated, standing at $108 per barrel in Monday's trading session. Last week saw crude oil prices rise by 11 percent amid tightening supplies and high fuel demand for shipping. Iranian attacks on tankers near the Strait of Hormuz disrupted oil flows.
Higher crude oil prices create macroeconomic risks for India, weakening the current account deficit and putting pressure on the national currency. In today's trading, Brent oil futures fell by 2.5 percent to $107 but remained above comfortable levels.
Technical Outlook
Hitesh Rathi, technical analyst for stocks and derivatives at Angel One, stated that if the rally does not show significant participation from the broader market, the combination of narrow market leadership and strong resistance is likely to limit further growth. He noted that under these circumstances, the current risk-reward configuration is not favorable for bulls at this stage.
Regarding levels, the zone of 23250-23300 represents an immediate barrier for Nifty, followed by stronger resistance in the 23450-23500 zone. On the other hand, the 23050-23000 zone serves as immediate support, with stronger support at 22900 behind it, as he observed.