Nifty, Sensex pare losses; Realty plunges 3.5%, Metal, Financials drag as oil, geopolitics weigh

Indian equities remained in the red in afternoon trade on Friday, with sharp losses in realty and metal stocks weighing on the benchmarks, as elevated crude oil prices and escalating geopolitical tensions kept investors cautious.

At around 1:13 pm IST, the Nifty 50 was down 143.75 points, or 0.61%, at 23,334.05, while the Sensex fell 397.07 points, or 0.53%, to 74,505.52. Both indices had recovered from their intraday lows. The Nifty had slipped to 23,231.40 earlier, while the Sensex touched 74,160.16.

The broader market was also under pressure, with the Nifty Midcap 100 down 0.62% and Smallcap 100 declining 0.78%. India VIX, a gauge of expected market volatility, was up 5.02% at 12.39.

Brent crude on Friday briefly touched a four-month high of $109.97 a barrel on Friday before easing to around $107 amid escalating West Asia tensions. The benchmark is still headed for a weekly gain of more than 10%, while US West Texas Intermediate (WTI) crude was trading around $101 after crossing the $100 mark for the first time since May.

Realty, metals bear the brunt

The Nifty Realty index was the biggest sectoral loser, falling 3.35%, while Nifty Metal declined 2.18%. Nifty Commodities was down 1.30%, Capital Markets 1%, Financial Services 25/50 0.89%, Oil & Gas 0.81% and Auto 0.76%.

The pressure on metals and commodities comes as investors assess the impact of the sharp rise in crude and broader commodity prices on inflation and interest rates. Higher energy costs can also raise input costs for industrial and metal companies, while a risk-off environment tends to trigger profit-taking in cyclical stocks. Global metal stocks have also been under pressure amid concerns over growth and tighter financial conditions.

Realty stocks, meanwhile, are particularly sensitive to interest rates and bond yields. Rising crude prices have strengthened inflation concerns and pushed government bond yields higher, raising the prospect of tighter monetary conditions and potentially weighing on borrowing costs and demand for property.

The financial sector was also weak, with Nifty Financial Services down 0.85%. Higher bond yields and concerns over economic growth typically weigh on rate-sensitive financial stocks.

IT bucks broader sell-off

Information technology stocks provided some relief, with the Nifty IT index gaining 0.45%. Media rose 0.46%, while Healthcare and Pharma were broadly flat.

Among individual Nifty stocks, Dr Reddy's Laboratories gained 2.76%, making it the top performer. Tech Mahindra rose 1.04%, HCLTech 0.99%, Tata Motors Passenger Vehicles 0.82%, Wipro 0.66% and Infosys 0.54%.

At the other end, JSW Steel fell 2.62%, Hindalco Industries 2.42% and Tata Steel 2.29%. Bajaj Finserv, Adani Enterprises, Maruti and Eicher Motors were among the other major laggards.

Oil, geopolitics drive risk-off mood

The central concern for Indian equities remains crude oil, with Brent having climbed above $108 a barrel as the conflict in West Asia threatens shipping routes and energy supplies. The escalation has raised fears of higher inflation and interest rates globally, putting additional pressure on risk assets.

The Indian rupee has also weakened amid elevated crude prices and foreign portfolio outflows, adding to concerns around India's import bill and external balances.

The sell-off comes after Indian benchmarks had managed a modest recovery on Thursday, but the underlying risk-off mood remains intact. The Nifty and Sensex are now headed for their fifth consecutive weekly decline, according to Reuters.

Interestingly, the weakness in the secondary market comes even as the primary market remains active, with NSE, Karamtara Engineering, Steamhouse India and Asset Reconstruction Company (India) drawing positive grey-market premiums.