Indian shares edged lower for a second straight session on Tuesday, witnessing its biggest fall since August 13, on fears that a surge in crude prices following attacks on Saudi oil facilities could hurt the economy further.
The Sensex ended 642 points lower at 36,481, while the broader Nifty50 index lost 186 points to end the day at 10,818.
GAIL, Titan, HUL, Asian Paints and Infosys were the top gainers on the Nifty50, while Hero MotoCorp, Tata Steel, Tata Motors, Axis Bank and Maruti Suzuki led the losses.
All sectoral indices ended the day in the red. Major selling was seen in auto, PSU Bank and realty indices, down over 3.5 percent each. The Nifty Metal slipped 2.8 percent, while the Nifty Bank was down 2.5 percent.
Here are 5 factors that dragged the market:
Saudi Drone Attack
Indian markets plunged as crude prices surged following attacks on Saudi oil facilities. However, oil prices later shed some of its gains as the United States flagged the possible release of crude reserves.
Sentiment also remained negative as markets were cautious over the threat of a military response to attacks on Saudi Arabian crude oil facilities that halved the kingdom’s output and prompted a price spike not seen in decades.
Investors were also worried as a rise in crude oil prices may worsen the already slowing economy and lead to rise in inflation.
RBI governor Shaktikanta Das said India’s current account and fiscal deficit could take a hit if oil prices continue to rise after the attack.
"We should allow a few more days to see how the situation plays out before taking a final view depending on how long it persists. It will have some impact on the current account deficit and further perhaps on the fiscal deficit if it lasts longer," Shaktikanta Das told the CNBC-TV18.
Asian markets were under pressure over the threat of military action over the attacks on Saudi oil facilities. Investors remained cautious ahead of an expected interest rate cut from the US Federal Reserve on Wednesday and the next round of US-China trade talks on Thursday.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.66 percent. Chinese shares fell 1.07 percent, while Hong Kong shares slumped 1.18 percent.
Auto, Financials Lead Losses
Shares of automobile companies extended losses as concerns over demand exacerbated given the sharp jump in global crude oil prices, which will make owning a car more expensive at a time when the industry faces a slowdown.
Banks also witnessed major selling with Axis Bank, Bank of Baroda, State Bank of India, Punjab National Bank and IndusInd Bank down between 3-5 percent.
The Indian rupee extended fall against the US dollar as higher oil prices stoked concerns about inflation, economic growth and deficits. The rupee inched closer to 72 per dollar during the day. Rupee traders are also focused on Federal Reserve's meeting, where policymakers are widely expected to cut interest rates.
First Published: IST