Sensex, Nifty fall as banks, oil prices weigh on markets

Indian equity benchmarks ended lower on Friday, snapping a brief winning streak, as banking stocks came under selling pressure and crude oil prices stayed elevated. The BSE Sensex fell over 300 points, while the NSE Nifty slipped below the 24,300 mark, according to provisional exchange data.

Investors turned cautious after a recent rally, with profit-booking emerging in financials. The Nifty Bank index dropped over 1 percent, dragged by heavyweights such as HDFC Bank, ICICI Bank, and State Bank of India.

Banking stocks lead the slide

Banking shares, which had driven much of the recent market gains, were the biggest drag on the indices. Concerns over margin pressure and rising deposit costs continue to weigh on the sector, analysts said. The sell-off was broad-based, with private and public sector lenders both facing losses.

HDFC Bank fell nearly 2 percent, while ICICI Bank and Axis Bank also declined. The financial sector's weakness spilled over into other rate-sensitive stocks, including realty and auto shares.

Crude oil prices add to worries

High crude oil prices compounded the market's woes. Brent crude hovered above $85 a barrel, raising concerns about India's import bill and inflationary pressures. A sustained rise in oil prices could widen the current account deficit and put pressure on the rupee, economists have warned.

The rupee weakened slightly against the US dollar, trading near 83.60, as oil importers bought dollars. Higher fuel prices also threaten to push retail inflation higher, potentially delaying any near-term interest rate cut by the Reserve Bank of India.

Market breadth and sectoral performance

Market breadth was negative, with more than 2,000 stocks declining on the BSE. Among sectoral indices, only IT and FMCG managed to close in the green, as investors sought refuge in defensive plays.

• Nifty IT rose 0.4 percent, led by Infosys and TCS.
• Nifty FMCG gained marginally, supported by Hindustan Unilever.
• Nifty Realty and Nifty Auto fell over 1 percent each.

Global cues and foreign flows

Global cues were mixed. While US markets closed flat overnight, Asian peers ended lower on concerns over slowing demand in China. Foreign institutional investors remained net sellers, offloading shares worth around Rs 1,200 crore, provisional data showed.

Domestic institutional investors, however, bought shares worth over Rs 1,500 crore, providing some support. Analysts say the market is likely to remain range-bound in the near term, with earnings and global data points dictating direction.

Looking ahead, investors will watch next week's US inflation data and any fresh signals from the RBI on the monetary policy path. Oil price movement will also be key, as any sustained spike could further dent market sentiment.