Stock market closes lower: West Asia tensions, crude spike among 6 key reasons

The equity benchmark indices ended lower on Tuesday (July 14), with the Sensex falling 562 points to 77,055 and the Nifty declining 159 points to close at 24,052 as escalating West Asia tensions, a spike in crude oil prices and rupee weakness against the US dollar weighed on sentiment.

Market breadth remained firmly negative, with the advance-decline ratio at 1:2. Thirty-four Nifty stocks ended in the red, while 11 constituents fell 2% or more.

Here are the key reasons behind today’s market decline:1. West Asia tensions dampen sentiment
Escalating tensions in West Asia kept investors cautious and weighed on risk appetite across the market.

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2. Crude oil spike pressures equities

Higher crude oil prices hurt sectors sensitive to rising energy costs. Auto stocks declined, with Tata Motors PV and Bajaj Auto among the top losers. Crude-linked sectors such as aviation and paints also came under pressure, with IndiGo ending 2% lower.

3. Rupee depreciation adds to pressure

Weakness in the rupee against the US dollar added to the negative sentiment, contributing to the broader market decline.

4. HCLTech slides after Q1 earnings

HCLTech was the top loser on the Nifty, falling more than 4% after reporting a mixed set of Q1 earnings.

Dharmesh Kant, Head Research, Chola Securities, on HCLTech, said, “As far as the HCLTech numbers are concerned, they were better than expectations, so that is certainly a positive. But, to my mind, the entire IT space has once again become a quarter-to-quarter story.

Deal wins are shorter in duration, and every quarter you have to evaluate how things are shaping up and how disruption is evolving. The other thing, which is my personal view, is that this is more of a survival strategy. Most of these companies are focusing on survival rather than pursuing a sustainable long-term growth strategy. Whatever opportunities exist in the IT space, they are trying to explore.

TCS is talking about one gigawatt of data centre capacity, while HCLTech is starting with 50 megawatts. These are all low-margin, capital-intensive businesses with long gestation periods. But it also tells you that these companies don’t have many other avenues to deploy the cash lying on their balance sheets.

The question is how to utilise that capital effectively. So I’ll leave it there. The uncertainty is still there, and you have to assess the sector quarter by quarter based on management commentary. If there is a valuation gap, investors can take advantage of it.”

5. Banking and broader markets weaken

The Nifty Bank index fell 669 points to 57,462, while the Midcap Index declined 275 points to 62,766.

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6. Stock-specific action continues

Despite the broader weakness, select stocks saw buying interest. Pharma and select IT shares outperformed, with Sun Pharma and TCS among the top Nifty gainers.

Biocon surged 7% after Mylan sold its entire 5.6% stake through the block deal window. CONCOR rose more than 6% following its healthy Q1 business update, while MCX gained 4% to feature among the top midcap performers.

Kalyan Jewellers extended its gains to close 4% higher, while Landmark Cars jumped 15% after continuing its double-digit growth. SBI Card, Divi’s, Adani Green and Supreme Industries were also among the top midcap gainers.

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On the losing side, Lodha declined more than 4% on profit booking, while life insurance stocks including ICICI Prudential Life and HDFC Life ended lower ahead of their quarterly results.

From the Sensex basket, Bharti Airtel Ltd, Apollo Hospitals Enterprise Ltd, Tata Consultancy Services Ltd, JSW Steel Ltd, Dr Reddy’s Laboratories Ltd and Hindalco Industries Ltd were the major gainers.

HCL Technologies Ltd, Shriram Finance Ltd, Tata Motors Passenger Vehicles Ltd, InterGlobe Aviation Ltd, Jio Financial Services Ltd and Bajaj Finserv Ltd were the biggest laggards.

Dinshaw Irani, CEO, Helios Mutual Fund, on Welspun Corp, said, “Welspun Corp, the rationale for us was that we thought things would normalise over a period of time, which fell flat on our faces. I mean, things have once again started deteriorating in West Asia.

We were thinking of reconstruction happening. We weren’t even thinking about trans-peninsular pipelines from Hormuz. We were more focused on rebuilding in the Gulf region after things had normalised. But that doesn’t seem to be happening. Beyond that, I don’t want to say much more, but the stock has worked out well for us anyway.”