Indian shares drop again on outflows, weak monsoon woes

Indian equity benchmarks extended their falling streak on Monday, on concerns over a foreign selloff, expectations of a weak monsoon, and renewed tensions in the Middle East.

The U.S. struck Iranian military sites and Iran’s Revolutionary Guards said they had targeted a U.S. base in response, in the latest exchange of attacks amid negotiations to end the three-month-old war.

India’s Nifty 50 fell 0.7% to 23,382.6 and the Sensex lost 0.68% to 74,267.34. The indexes have fallen 2.7% and 2.9%, respectively, over four sessions.

Fourteen of the 16 major sectors fell while the broader small-caps and mid-caps dropped 0.9% and 1.5%, respectively.

Overseas investors sold a record $2.22 billion of shares on Friday when index provider MSCI’s May rebalancing came into effect.

Heavyweight financials, which make up a large portion of foreign portfolio investors’ holdings of Indian shares, slipped 1.4%.

Consumer goods and automobile shares shed 1.7% and 2.3%, respectively, as the forecast of the weakest monsoon showers in 11 years fueled concerns over crops, food prices and economic growth.

On the flip side, IT shares rose 2.7% after strong earnings from U.S.-based tech firm Snowflake lifted global software-as-a-service, cloud and IT service firms.

“Nifty 50 companies have recorded eight consecutive quarters of single-digit earnings growth. If there is no resolution to Iran war in the near term and crude prices sustain between $90 to $100 per barrel, FY27 earnings estimates could be downgraded as well,” said Sunny Agrawal, head of fundamental equity research at SBICAPS Securities.

Investors await the Reserve Bank of India’s policy decision on Friday.

The central bank is expected to keep rates unchanged, although a majority of economists polled by Reuters expect at least one increase by year-end due to risks from high oil prices and pressure on the rupee from weak capital inflows.