India's equity benchmarks fall as HDFC Bank, Mideast uncertainty weigh

India’s equity benchmarks fell on Tuesday, weighed by weakness in top private lender HDFC Bank, while conflicting signals from the Middle East also dragged on sentiment.

The benchmark Nifty 50 ended down 0.21% at 24,187.7, while the BSE Sensex shed 0.31% to 77,470.11.

The heaviest stock on the benchmarks, HDFC Bank, extended its decline to hit a five-week low on Tuesday, falling 2.1%. The lender lost 5.1% in the previous session after it reported weaker-than-expected net interest margin for the first quarter.

“The market reaction makes sense because the banking sector has not delivered the kind of operating improvement that should normally accompany (over) 18% credit growth,” said Dhananjay Sinha, CEO and co-head of institutional equities at Systematix Group.

The sector is growing faster, but not earning enough on that growth, Sinha said.

HDFC Bank was also under pressure after Reuters reported that the lender is awaiting an additional review by independent directors before recommending CEO Sashidhar Jagdishan’s reappointment to the Reserve Bank of India.

Meanwhile, Brent crude hovered around $90 a barrel as markets weighed reports of U.S.-Iran mediation against fresh attacks and Houthi threats to blockade Saudi Arabia.

Higher oil prices are a particular risk for India, the world’s third-largest crude importer, as they can fuel inflation, widen the trade deficit and pressure corporate margins.

Eight of the 16 major sectors fell. However, the broader small-caps and mid-caps edged higher by 0.5% and 0.3%, respectively.

Analysts attributed the broader market’s outperformance to sector and stock-specific moves driven by relatively strong earnings growth.

Reliance Industries fell 1.5% in its second straight session of decline, following a rally ahead of the first-quarter results.

Among the gainers, top cement maker UltraTech, rose 1.5%, extending gains from the previous session following strong quarterly profit.

SBI Funds Management ended 6.2% higher on market debut after a $1.03 billion initial public offering last week.