Sensex, Nifty Extend Losses as Bank Stocks Drag; Crude Oil Climbs

Mumbai: Indian equity benchmarks extended their losing streak on Friday, with the Sensex and Nifty closing lower as banking stocks bore the brunt of selling pressure. The weakness in financials offset gains in select IT and pharma shares, leaving the market in a cautious mood.

The 30-share Sensex slipped over 300 points intraday before paring some losses, while the broader Nifty50 settled below the key 24,500 level. Traders said the decline was largely driven by profit-booking in heavyweight bank stocks, which have been under pressure in recent sessions on concerns over margin compression and sluggish credit growth.

Banks Lead the Decline

Public sector lenders were the worst hit, with several PSU bank counters falling between 2-4 percent. Private banks also witnessed selling, as investors turned wary after a mixed set of quarterly earnings from some lenders earlier this week.

Analysts pointed out that the banking index has been a drag on the broader market for the past few sessions, with investors shifting money into defensive sectors such as FMCG and pharma. The Nifty Bank index fell nearly 1 percent, underperforming the benchmark indices.

"The market is in a consolidation phase, and banking stocks are seeing some profit-taking after a strong run," said a dealer at a domestic brokerage. "The lack of fresh triggers is also keeping participants on the sidelines."

Crude Climbs, Stoking Inflation Worries

Adding to the cautious tone, global crude oil prices edged higher on Friday, with Brent crude trading above $82 per barrel. The rise in oil prices comes amid supply concerns and geopolitical tensions, raising fears of imported inflation for India, which is a major importer of crude.

A sustained uptick in crude prices could put pressure on the rupee and widen the current account deficit, analysts noted. It also complicates the Reserve Bank of India's fight against inflation, which has remained above the central bank's comfort zone.

"Crude is a key monitorable for the market," said a fund manager. "If prices stay elevated, it could impact corporate margins and delay any potential rate cuts."

Broader Market Mixed

The broader market presented a mixed picture, with the midcap and smallcap indices trading flat to slightly positive. While some midcap stocks saw buying interest, the overall sentiment remained subdued due to the weakness in the banking pack.

Sector-wise, the Nifty IT index gained nearly 0.5 percent, supported by hopes of steady demand from US clients. The pharma index also edged higher, bucking the negative trend. On the other hand, the auto and metal indices traded lower, mirroring the cautious mood.

Foreign institutional investors (FIIs) were net sellers in the cash market on Thursday, while domestic institutional investors (DIIs) bought shares, providing some support. Provisional data showed FIIs offloaded shares worth about ₹1,200 crore, while DIIs purchased equities worth ₹1,500 crore.

What to Watch Next

Market participants will now await fresh global cues, including US inflation data due next week, which could influence the Federal Reserve's policy stance. Domestically, the focus will shift to quarterly earnings from more blue-chip companies and the trajectory of crude oil prices.

With the earnings season entering its final leg, analysts expect volatility to remain high. The immediate support for the Nifty is seen around the 24,300 level, while resistance is placed at 24,700.