Sensex falls 350 points, Nifty closes below 23,900 as oil prices rise

Indian equity benchmarks ended sharply lower on Thursday, with the Sensex sliding 350 points and the Nifty closing below the 23,900 mark. The sell-off was driven primarily by a spike in global crude oil prices, which reignited inflation fears and dampened risk appetite across markets.

The BSE Sensex settled at 78,450, down 350 points from the previous close. The NSE Nifty ended at 23,885, losing 105 points. Broader indices also fell in line, with midcap and smallcap stocks witnessing heavy selling.

Oil prices surge, spook markets

Brent crude climbed above $85 a barrel in intraday trade, its highest level in weeks. Analysts attributed the rally to supply concerns after major oil-producing nations signalled potential output cuts. For India, which imports over 80% of its crude requirements, higher oil prices directly impact the fiscal deficit and fuel inflation.

Rising oil prices also put pressure on the rupee, which weakened against the dollar. A weaker rupee makes imports costlier and adds to the woes of companies with high dollar-denominated debt.

FII selling continues

Foreign institutional investors (FIIs) remained net sellers in the cash market for the fourth consecutive session. Provisional data showed they offloaded shares worth over Rs 1,200 crore on Thursday. Domestic institutional investors (DIIs), however, stepped in as buyers, but their purchases were not enough to stem the decline.

The sustained FII outflow has been a recurring theme in recent weeks, as global funds reassess their exposure to emerging markets amid rising US bond yields and a strong dollar.

Sectoral trends: IT, auto, banks drag

All major sectoral indices ended in the red. The Nifty IT index fell over 1%, led by losses in Infosys and TCS, as concerns over US demand slowdown resurfaced. Auto stocks also took a hit, with Maruti Suzuki and Tata Motors shedding ground. The banking pack remained weak, with HDFC Bank and ICICI Bank among the top drags on the Nifty.

Oil marketing companies (OMCs) such as IOC and BPCL fell sharply, as higher crude prices threaten their refining margins. The energy sector was the worst performer of the day.

What traders are watching

Market participants are now eyeing the next round of macroeconomic data, including India's retail inflation print for July, due next week. A spike in inflation could delay any expected rate cut by the Reserve Bank of India, further denting sentiment.

Globally, all eyes are on the US Federal Reserve's policy meeting later this month. Any hawkish stance could trigger another round of selling in emerging markets.

The coming sessions will likely see heightened volatility. Traders are advised to keep a close watch on crude oil movements and FII flow data. A sustained break above $85 for Brent could trigger further downside for Indian equities.