Sensex Pares Steep Opening Losses to Trade Nearly Flat as Oil Above $110 and Infosys Weakness Weigh on Mumbai

India's benchmark stock indexes recovered most of their early losses on Monday. Gains in private banks, pharmaceutical and metals stocks offset weakness in information technology shares, even as crude prices stayed above $110 a barrel.

The 30-share BSE Sensex was down 49.75 points, or 0.07%, at 73,074.08 at 12:21 p.m. local time. It had plunged more than 535 points shortly after the open. The NSE Nifty 50 traded around the 22,600 level by midday, after dropping as low as about 22,420 early in the session. That low was just over 1% above its 52-week low of 22,179.90.

Both indexes had briefly turned positive late in the morning before slipping back into slightly negative territory.

A rough start

Monday's session began under pressure. The Sensex opened about 0.7% lower, and only nine Nifty 50 stocks were trading higher in the opening minutes. The India VIX volatility index rose nearly 4% to about 17.5.

The early drop extended a losing streak. On Friday the Sensex fell 125.56 points to 73,123.83 and the Nifty slipped 87.65 points to 22,600, a fourth straight decline. For the week, the Sensex lost 2.2% and the Nifty 2.4%, with every NSE sectoral index ending Friday's session lower.

Heavy demand for the $3.2 billion initial public offering of Jio Platforms also drew liquidity from the secondary market last week. The IPO was subscribed about 13.8 times.

IT stocks lead losses

Technology shares were the weakest group. Infosys fell after it cut its full-year growth forecast by more than the market expected, even though it reported a 6.2% rise in September-quarter profit and a 10.2% increase in revenue.

The Nifty IT index dropped nearly 1.8% early in the session. Asian Paints, Hindustan Unilever and Tata Consumer Products were also among the decliners.

Shriram Finance was the biggest loser in the Nifty 50, falling more than 5%. Bajaj Finance and HDFC Life also declined.

Banks and pharma help recovery

Gains in selected heavyweights helped the recovery. Dr. Reddy's Laboratories rose more than 4% and exchange operator BSE climbed nearly 4%. JSW Steel gained more than 2%, and Kotak Mahindra Bank rose about 2%. Adani Ports and IndiGo were also among the Sensex gainers.

Pharma, healthcare and private bank indexes outperformed the broader market.

Uday Kotak, founder of Kotak Mahindra Bank, said at an industry event on Monday that policymakers "did the right thing" in mobilizing foreign currency non-resident deposits, known as FCNR(B). Public sector banks have raised about $12.7 billion through the scheme, helped by swap support from the Reserve Bank of India, according to bank chiefs.

"We need not panic right now, we need to be strategic about it for the time which will inevitably come," Kotak said. He said India needs to "think about our tax structure, capital gains structure," and noted that the country's high price-to-earnings ratios relative to other markets have been one reason for foreign selling.

Oil and geopolitics

High crude prices remain a key concern for India, which imports most of its oil. Brent eased about 1.6% to around $114.88 a barrel in morning trade, and U.S. West Texas Intermediate fell to about $101. Both stayed close to recent six-month highs.

Analysts say sustained high oil prices threaten to widen India's import bill, push up inflation and squeeze corporate margins.

Tensions in the Middle East continue to weigh on sentiment. Recent developments include intensified Houthi attacks on Saudi Arabia, a rise in attacks on commercial shipping in the Strait of Hormuz, and reports of heightened Iranian threats against U.S. personnel.

The rupee opened nearly flat at about 94.93 per U.S. dollar, compared with 94.94 at Friday's close.

Sentiment still fearful

Tickertape's Market Mood Index, which tracks investor sentiment, rose to 34.33 on Monday. That keeps it in the "fear" zone but up from "extreme fear" about two weeks ago.

Across Asia, most markets fell. South Korea's KOSPI lost about 1.4%, Japan's Nikkei 225 fell 0.8%, and Taiwan's benchmark dropped nearly 2%.

Investors are now focused on the Fed's policy decision on Wednesday, which could affect global risk appetite and foreign investment flows into emerging markets such as India. Big U.S. technology earnings this week are also expected to influence Indian IT stocks.

_This article is for information only and does not constitute financial advice._