Indian stocks drop as $87 Brent crude compounds inflation
Escalating West Asian conflicts pushed Brent crude above $87, halting a three-day rally in Indian equities as investors grappled with rising domestic inflation and a widening trade deficit.
Indian equity benchmarks ended a three-day winning streak on Tuesday, pressured by a sharp rise in oil prices and deteriorating global risk appetite. The Nifty 50 fell 0.66% to close at 24,052.05, while the BSE Sensex dropped 0.72% to 77,054.94.
The selloff was triggered by escalating conflicts in West Asia, which drove Brent crude up 4% to $87 per barrel. For India, a major energy importer, the price spike compounded existing domestic macroeconomic strains. Consumer price inflation accelerated to 4.38% in June, moving further above the central bank’s 4% midpoint target, while the trade deficit widened to $30.43 billion.
The inflationary pressure dragged down rate-sensitive sectors, with Nifty PSU Bank, Auto, and Financial Services falling up to 2% and Nifty Realty dropping 1.97%. Market breadth was distinctly bearish, with 2,278 stocks declining against just 1,022 advances as HCL Tech and Shriram Finance led the benchmark lower. Pharma and metal stocks provided a defensive offset.
Technically, the Nifty 50 has formed a bearish candlestick and is trading near a critical support zone at 23,800. A break below this level could trigger a decline toward 23,500. Conversely, the index faces immediate resistance at 24,300, with momentum indicators like the MACD and RSI showing waning bullish strength that suggests a period of range-bound trading.
The banking sector mirrored the broader weakness, with Nifty Bank falling 1.15% to 57,462.30. However, the index held above its 200-day moving average, a level analysts view as crucial for maintaining the long-term positive structural trend.
Amid the broader weakness, MarketSmith India flagged two technical breakout opportunities. The advisory firm recommended buying Orchid Pharma between ₹1,044 and ₹1,060, targeting ₹1,200 with a stop loss at ₹990, citing a financial turnaround despite a high P/E of 185.20. It also suggested purchasing Multi Commodity Exchange of India in the ₹2,862 to ₹2,905 range, targeting ₹3,290, pointing to the exchange's asset-light model and strong cash generation.
