New Delhi: Indian stock markets ended lower on Monday as a sharp fall in heavyweight banking stocks, coupled with growing geopolitical tensions in the Middle East, weighed heavily on investor sentiment. The benchmark BSE Sensex fell 442.93 points (0.57%) to close at 77,708.52, after plunging nearly 783 points during the day. The NSE Nifty50 also declined 95.80 points (0.39%) to settle at 24,238.50.
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The biggest drag on the market came from private banking giants HDFC Bank and Axis Bank, whose shares slumped after investors reacted negatively to their latest quarterly earnings.
Axis Bank emerged as the biggest loser on the Sensex, falling 5.48 percent, while HDFC Bank dropped 5.12 percent. Analysts said HDFC Bank's earnings disappointed investors, particularly because of weaker-than-expected net interest margins (NIM) — a key measure of a bank's profitability that reflects the difference between the interest it earns on loans and the interest it pays on deposits.
"HDFC Bank has disappointed, particularly on the NIM front," said V K Vijayakumar, Chief Investment Strategist at Geojit Investments.
Other major losers included Maruti Suzuki, Kotak Mahindra Bank, Infosys, Tata Consultancy Services (TCS), Mahindra & Mahindra and Bharat Electronics. On the other hand, Trent, Power Grid, NTPC and Bharti Airtel ended the day with gains.
Apart from weak banking earnings, investors were also unsettled by renewed tensions between the United States and Iran. The escalation pushed international crude oil prices close to USD 90 per barrel during the day, raising concerns that higher energy costs could fuel inflation and slow global economic growth.
"The collapse of the June ceasefire between the US and Iran has pushed crude prices to touch USD 90 a barrel. Markets have started the week cautiously as geopolitical risks continue to rise," said Vinod Nair, Head of Research at Geojit Investments.
Although Brent crude later eased slightly to around USD 88.06 per barrel, concerns over prolonged conflict kept investors on edge.
Market experts said disappointing earnings from large private banks and global uncertainty created a double blow for equities.
"Investors turned cautious amid escalating Middle East tensions and weaker-than-expected bank earnings, especially lower net interest margins, which triggered heavy selling in banking stocks," said Ponmudi R, CEO of Enrich Money.
Despite the weakness in benchmark indices, broader markets outperformed. The BSE SmallCap Select Index gained 0.56 percent, while the MidCap Select Index rose 0.39 percent, indicating buying interest in smaller companies.
Among sectoral indices, Private Banks suffered the steepest losses, falling 2.15 percent, followed by Banking and Financial Services indices. In contrast, PSU Banks emerged as the top performers, rising 2.96 percent, while utilities, power, healthcare, metals and oil & gas stocks also closed higher.
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Ajit Mishra, Senior Vice-President (Research) at Religare Broking, said investors remained cautious after disappointing results from private banks, while rising crude oil prices revived inflation concerns.
Globally, Asian markets ended mixed. China's Shanghai Composite and Hong Kong's Hang Seng closed higher, while South Korea's KOSPI plunged 4.46 percent. Japanese markets remained shut for a holiday. European markets traded mostly higher, while US markets had ended lower on Friday.
Meanwhile, Foreign Institutional Investors (FIIs) remained net sellers, offloading Indian equities worth Rs 376.41 crore on Friday, according to exchange data.
The market decline came just a trading session after the Sensex had rallied 964.58 points and the Nifty had gained 261.55 points on Friday.
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