The Indian stock market started the week on a weak note, with benchmark indices trading sharply lower as investors reacted to a combination of domestic and global factors.

Banking stocks remained at the centre of the decline after several private lenders announced their June quarter (Q1FY27) earnings over the weekend.

At the time of writing, the Sensex was down more than 700 points or 0.9%, while the Nifty 50 slipped below the 24,200 mark, down 0.7%. 

The broader weakness came as investors assessed bank earnings, rising crude oil prices and fresh geopolitical tensions in the Middle East.

Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, said, “The frontline indices started the week on a muted note on the back of a sharp selloff in frontline private sector banks and traded within the bar of the previous session. HDFC Bank, Axis and Kotak are the top three losers in Nifty at the current juncture.”

So, what is dragging the market lower today? Here are the key factors.

Banking stocks lead the market decline

The biggest drag on the market came from private banking stocks.

HDFC Bank, Axis Bank and Kotak Mahindra Bank saw heavy selling in intraday trade, while Yes Bank also traded lower. The weakness followed the June-quarter earnings announced by several banks over the weekend.

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In intraday trade, Axis Bank fell over 5.4%, HDFC Bank declined nearly 4.9%, Kotak Mahindra Bank slipped around 2.7%, while Yes Bank was down about 3%. The sharp fall in these heavyweight private lenders weighed heavily on the Nifty Bank index, which was trading over 1.5% lower during the session.

Why are bank stocks down? Here’s what analysts say

Sunny Agrawal – Head of Fundamental Research at SBI Securities said, “Today, most private banks are under pressure due to the market’s reaction to the results announced last Saturday. What we have witnessed is that the net interest margins (NIM) of most private banks are under pressure, predominantly due to two reasons –

Focus on Corporate Books: Banks have focused heavily on corporate books, which have relatively lower yields compared to retail books. This has led to some pressure on the yield on assets.

Repricing of Deposits: The repricing of deposits is a continuing process following the steep repo rate cuts we have seen. Consequently, that benefit has not fully played out for most private banks.”

Furthermore he noted, “Additionally, the benefits of FCNR (Foreign Currency Non-Resident) deposits have yet to be factored into deposit mobilization, meaning these benefits are not yet captured in the numbers. Overall, on a net-net basis, net interest margins have remained under pressure. On the other hand, growth in the CASA (Current Account Savings Account) ratio—which is a source of low-cost deposits for most banks -has also been subdued for private banks. Hence, we have seen a negative reaction across the entire banking pack.”

Crude oil climbs above $90 a barrel

The latest developments in the Middle East also pushed crude oil prices sharply higher.

Brent crude rose more than 3% to $90.83 a barrel, while US West Texas Intermediate (WTI) crude gained nearly 3% to $84.84 a barrel.

Higher crude oil prices remain an important concern for India because the country imports a large share of its crude oil requirement. 

Rupee weakens against the US dollar

The Indian rupee also remained under pressure on Monday.

In early trade, the domestic currency fell 11 paise to 96.41 against the US dollar. 

Currency movements often influence investor sentiment, particularly when global uncertainties are already elevated.

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Iran-US conflict pushes global risk higher

Global sentiment also remained cautious after geopolitical tension between Iran and the United States intensified over the weekend.

Whenever geopolitical uncertainty rises, investors usually become more cautious, which often weighs on equity markets.

Expert outlook

Market experts believe rising crude oil prices remain the biggest near-term risk for Indian equities. At the same time, they also point out that weakness in global artificial intelligence-related technology stocks could eventually redirect foreign investment towards markets such as India.

Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said, “There are near-term headwinds and tailwinds for the market now. The strongest headwind is Brent crude spiking above $90 on escalating tensions between US and Iran. If this trend continues, India’s vulnerability to energy shock will resurface with negative implications for the rupee and FPI flows. On the positive side, the weakening of the AI trade continues in markets like the US, South Korea and Taiwan.”

He added, “This can make markets like India attractive to the FPIs.