Sensex, Nifty make negative start as rising oil prices raise inflation concerns

Indian equity benchmarks made a negative start on Monday and extended their losses as fresh escalation in the US-Iran conflict pushed oil prices higher, raising concerns over inflation outlook. Oil prices extended gains as the US and Iran exchanged strikes at each other’s tankers in the Strait of Hormuz.

Both Sensex and Nifty were trading lower with cut of around 0.25% each in early deals due to selling pressure in IT stocks. Sentiments remained downbeat as Foreign Institutional Investors (FIIs) remained net sellers on September 4, 2026, with a net outflow of Rs 3,111.94 crore. IT stocks were the leading losers after stronger-than-expected US jobs data strengthened expectations of a Federal Reserve rate hike in September. Higher U.S. rates could curb client spending, weighing on Indian IT firms that generate a significant share of their revenue from the United States.

On the global front, Asian markets were trading mixed amid buying interest in technology shares, while there was some cautiousness due to surge in crude prices. Meanwhile, traders were gearing up for a crucial week of events culminating in US inflation data that could determine the Federal Reserve’s decision on interest rates.

The BSE Sensex is currently trading at 76333.40, down by 182.03 points or 0.24% after trading in a range of 76251.46 and 76477.19. There were 6 stocks advancing against 24 stocks declining on the index.

The top gaining sectoral indices on the BSE were Telecom up by 1.93%, Capital Goods up by 0.33%, Industrials up by 0.31%, Healthcare up by 0.23% and Power up by 0.21%, while IT down by 1.59%, Metal down by 0.76%, TECK down by 0.75%, Realty down by 0.66% and FMCG down by 0.36% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 0.55%, Eternal up by 0.46%, ICICI Bank up by 0.45%, Bharat Electronics up by 0.38% and Larsen & Toubro up by 0.10%. On the flip side, Infosys down by 2.52%, Tech Mahindra down by 1.56%, HCL Technologies down by 1.49%, Tata Steel down by 1.38% and TCS down by 0.73% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) has absorbed over Rs 6.02 lakh crore from the banking system through two variable rate reverse repo (VRRR) auctions as surplus liquidity remained at a record high. The central bank received and accepted bids worth Rs 5,41,975 crore in a three-day VRRR auction against the notified amount of Rs 7 lakh crore. The auction was conducted at a cut-off rate of 5.24%. In another three-day VRRR auction, against a notified amount of Rs 1.5 lakh crore, banks parked Rs 60,419 crore with the RBI, also at 5.24%. Together, the two operations helped the RBI absorb Rs 6,02,394 crore of surplus liquidity.

The RBI has stepped up its liquidity absorption operations as the banking system has been flooded with funds following large inflows through the special FCNR(B) deposit scheme. According to RBI data, liquidity in the banking system is currently estimated to be in surplus of around Rs 10.32 lakh crore as of September 3. The data also showed that the RBI’s special forex measures had mobilised $136.38 billion as of August 31, including $127.23 billion through FCNR(B) deposits, $5.26 billion through OFCBs (Overseas Foreign Currency Borrowings) and $3.89 billion via ECBs (External Commercial Borrowings).

The FCNR(B) window was closed a month early on August 31 due to the strong response, while the ECB/OFCB facility remains open until December 31, and inflows through these routes are expected to pick up. The mobilisation brought foreign currency into the banking system, while the subsequent swaps with the RBI provided rupee liquidity to banks. Besides FCNR(B) inflows, month-end government expenditure, including payments towards salaries and pensions, also added to liquidity in the banking system.

The higher surplus liquidity in the banking system has pulled down short-term money market rates over the past few weeks. Currently, weighted average call money rates are trading at 4.93%, which is 0.32% below the policy rate. To align money market rates with the repo rate, the central bank conducted 32 VRRR auctions between August and so far in September, with maturities ranging from overnight to 14 days.

The CNX Nifty is currently trading at 23835.85, down by 61.85 points or 0.26% after trading in a range of 23818.50 and 23890.00. There were 17 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were ICICI Bank up by 0.69%, Bharti Airtel up by 0.66%, Bharat Electronics up by 0.62%, Coal India up by 0.45% and Eternal up by 0.37%. On the flip side, Infosys down by 2.65%, Tech Mahindra down by 2.09%, Wipro down by 1.61%, HCL Technologies down by 1.55% and Bajaj Auto down by 1.28% were the top losers.

Asian markets were trading mixed; KOSPI jumped 239.53 points or 3.58% to 6,926.74, Nikkei 225 surged 1269.06 points or 1.95% to 66,290.00, Taiwan Weighted soared 690.26 points or 1.48% to 47,241.39 and Jakarta Composite was up by 3.41 points or 0.05% to 6,639.89. On the other hand, Hang Seng declined 266.87 points or 1.05% to 25,384.00, Shanghai Composite fell 9.42 points or 0.24% to 3,920.70 and Straits Times was down by 7.17 points or 0.12% to 5,794.79.