Sensex sinks over 700 points as crude surges, bank stocks retreat

Indian equity benchmarks opened deep in the red on Tuesday, with the Sensex tumbling more than 700 points and the Nifty slipping below the 24,050 mark. Heavy selling in HDFC Bank and other financial stocks, combined with a spike in crude oil prices amid escalating Middle East tensions, drove the downturn.

The BSE Sensex dropped over 550 points in the first hour of trade before extending losses to nearly 700 points. The broader Nifty50 index fell below 24,050, marking a sharp reversal from recent gains. Market breadth was negative, with more than two stocks declining for every one that advanced on the BSE.

Banking stocks bear the brunt

HDFC Bank was the biggest drag on the indices, falling over 2 percent in early trade. Other private sector lenders such as ICICI Bank and Kotak Mahindra Bank also faced selling pressure. The Nifty Bank index slumped nearly 1.5 percent, reflecting broad-based weakness in the financial sector.

PSU bank stocks were not spared either. State Bank of India and Bank of Baroda declined over 1 percent each. Analysts attributed the sell-off to profit booking after recent gains, coupled with concerns over rising input costs and margin pressure in a high-interest-rate environment.

Crude surge fuels inflation fears

Brent crude oil prices climbed above $85 a barrel in international markets, stoked by renewed US-Iran tensions in the Persian Gulf. Higher crude prices directly impact India's import bill and raise the spectre of imported inflation, which could delay any dovish turn by the Reserve Bank of India.

Oil marketing companies such as IOC and BPCL also came under pressure. The rupee weakened against the dollar, adding to the unease among foreign portfolio investors who have been net sellers in recent sessions.

Pharma stocks hit by tariff threat

Pharmaceutical stocks joined the broader sell-off after reports emerged that the US administration is considering fresh tariffs on generic drug imports. The Nifty Pharma index fell over 1.5 percent, with Dr Reddy's Laboratories, Sun Pharma, and Cipla all trading in the red.

India is a leading supplier of generic drugs to the US market. Any tariff action could squeeze margins for Indian pharma companies that derive a significant portion of their revenue from North America.

Midcap and smallcap indices also declined in tandem with the benchmarks. The volatility index, India VIX, rose nearly 5 percent, indicating heightened anxiety among traders.

Investors are now eyeing cues from global markets and any fresh developments on the geopolitical front. The focus will also remain on the trajectory of foreign fund flows and the upcoming monthly derivative expiry.