Mumbai: Indian equity markets ended lower on Monday as weak quarterly earnings from private sector banks and rising geopolitical tensions in the Middle East weighed on investor sentiment. Heavy selling in banking stocks, coupled with concerns over crude oil prices and the continuing US-Iran conflict, pushed benchmark indices into the red despite resilience in the broader market.

The BSE Sensex declined 442.93 points, or 0.57%, to close at 77,708.52, while the NSE Nifty50 fell 95.80 points, or 0.39%, to settle at 24,238.50.

Banking stocks emerge as biggest drag

Private banking stocks led Monday’s decline after investors reacted negatively to the latest quarterly earnings, raising concerns over pressure on net interest margins and profitability.

Axis Bank emerged as the biggest loser on the Nifty, plunging 5.48%, while HDFC Bank dropped 5.12%. Maruti Suzuki India also remained under pressure, ending the session 2.18% lower.

On the positive side, a handful of stocks bucked the broader weakness. Trent topped the gainers’ list with a 2.98% rise, followed by Power Grid Corporation, which gained 1.82%, and NTPC, which advanced 1.57%.

Profit booking after recent rally

Market experts said Monday’s decline largely reflected healthy profit booking following the recent rally rather than a reversal of the broader market trend.

Riyank Arora, Associate Vice President – HNI & Derivatives at Hedged.in, said benchmark indices witnessed mild selling pressure in heavyweight stocks while the overall market structure continued to remain constructive.

According to him, the decline appears to be a normal correction after a strong rally, with key support levels still holding. He added that investors may continue to adopt a buy-on-dips strategy while maintaining disciplined risk management and closely monitoring important technical support zones.

Broader market remains resilient

Despite weakness in the benchmark indices, the broader market outperformed.

The Nifty Midcap 50 gained 0.61%, while the Nifty Smallcap 100 edged up 0.16%, indicating continued buying interest in mid- and small-cap stocks.

Among sectoral indices, Nifty Media was the best performer, rising 1.09%, followed by Nifty Consumer Durables, which gained 0.72%.

However, Nifty Auto slipped 0.26%, while Nifty IT declined 0.22%.

Meanwhile, the India VIX, often referred to as the market’s fear gauge, eased 1.29%, suggesting volatility remained under control despite the market’s decline.

Middle East tensions weigh on sentiment

Apart from domestic corporate earnings, investors closely tracked developments in the Middle East, where the conflict between the United States and Iran continues to intensify.

Analysts said concerns surrounding disruptions to global energy supplies and shipping through the Strait of Hormuz have kept investors cautious, with crude oil prices remaining elevated.

Ponmudi R, Chief Executive Officer of Enrich Money, said the ongoing conflict has entered a more critical phase, with military strikes extending into a ninth day and shipping activity in the Strait of Hormuz remaining severely affected.

He noted that the absence of any clear path towards de-escalation continues to keep global energy markets on edge and remains a significant risk for equity markets worldwide.

What investors should watch next

Market participants are expected to remain focused on upcoming corporate earnings, movements in crude oil prices and geopolitical developments in West Asia over the coming days.

Analysts believe these factors will play a crucial role in determining the short-term direction of Indian equities.

While Monday’s session reflected cautious sentiment, the resilience in the broader market and lower volatility indicate that investors continue to remain selectively optimistic. Unless geopolitical risks intensify further or earnings disappoint significantly, market experts believe the long-term outlook for Indian equities remains constructive.