Monsoon fears hit India stocks, Sensex plunges

Indian stock market benchmarks experienced a significant downturn on Friday afternoon, with the Sensex dropping 1,092 points and the Nifty 50 falling 359 points. This decline was primarily driven by weak global cues, a less optimistic monsoon forecast, and ongoing foreign investor selling.

The India Meteorological Department projected the lowest rainfall in 11 years for the June-September season, falling below 90% of the Long Period Average. This forecast, coinciding with El Niño conditions, has raised concerns about potential food inflation and decreased rural demand.

Adding to market pressures, foreign investors continued their selling trend, offloading equities worth Rs 1,043 crore on Wednesday. Geopolitical uncertainties surrounding a potential US-Iran peace deal also contributed to investor caution, increasing market volatility.

Despite the broad market weakness, which saw Nifty Smallcap 100 and Nifty Midcap 100 indices fall by about 1%, some sectors showed resilience. Nifty Oil & Gas and Nifty Metal indices declined significantly, while Nifty IT managed a slight gain due to selective buying.

External factors offered some relief, with lower global oil prices and a strengthening rupee supporting the market. Brent crude futures fell nearly 2% to below $92 per barrel, and the rupee appreciated by 53 paise against the US dollar.

Analysts noted that the scale of foreign portfolio investor selling has eased, and Q4 corporate results have generally exceeded expectations, with strong earnings growth reported in financials, automobiles, and metals. Future growth is anticipated in sectors like defense, capital goods, renewable energy, and pharmaceuticals.