Brent crude's drop to $104 lifts Indian banks and consumer stocks. FIIs sold Rs 1,891 crore on Thursday. Sustained oil below $105 could draw foreign buying.
Indian benchmark indices opened sharply higher on Friday as a decline in Brent crude to around $104 per barrel and a rally in global markets drove buying across rate-sensitive sectors. The Sensex climbed 332.39 points to 75,507.09, while the Nifty rose 84.60 points to 23,747.40.
Lower crude prices reduce India's imported inflation and ease pressure on the Reserve Bank of India to keep interest rates elevated. That dynamic directly benefits sectors with high sensitivity to borrowing costs and input prices. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, described Brent declining below $105 and rupee appreciation as positive developments. The read-through is straightforward: falling oil improves corporate margins and supports bond prices, which in turn lifts bank net interest margins.
From the 30-share Sensex pack, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank, Asian Paints, and UltraTech Cement were among the top gainers. These stocks benefit from either floating-rate loan books that hold up in a stable rate environment or input costs that fall with lower crude. Power Grid, Tech Mahindra, Tata Consultancy Services, and ITC lagged, suggesting the rally is concentrated in domestic cyclical names rather than export-oriented IT or defensive staples.
Despite the positive open, Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,891.21 crore on Thursday, according to exchange data. That selling contrasts with the buying seen across Asian markets – South Korea's Kospi, Japan's Nikkei 225, Shanghai's SSE Composite, and Hong Kong's Hang Seng all traded higher. The divergence implies that domestic institutional and retail investors are absorbing FII supply. A sustained rally depends on oil prices staying low and global risk appetite holding. A rebound above $105 would reintroduce inflation fears and test the durability of this move.
AlphaScala's proprietary scores for the two largest Indian private banks show a clear divergence. HDFC Bank (HDB) carries an Alpha Score of 37/100 (Mixed), reflecting neutral momentum and average valuation support. ICICI Bank (IBN) scores 57/100 (Moderate), indicating stronger relative strength and better earnings visibility. Traders positioning for a continued banking rally may find IBN offers a more favorable risk-reward setup, though both stocks benefit from the oil-driven macro tailwind.
The next decision point is whether Brent can sustain below $105. A further drop toward $100 would reinforce the rate-relief trade and likely draw FIIs back into Indian equities. Watch the weekly crude inventory data and any updates from US-Iran negotiations for the next catalyst.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.