Indian shares fell on Tuesday as oil prices spiked to above $91 a barrel, with a temporary U.S.-Iran ceasefire expiring and hopes for a new deal fading.
The prospect of sustained higher crude prices could also rekindle inflation worries for India, the world's third-largest oil importer.
The Nifty 50 (.NSEI) fell 0.27% to 24,219.80 and the BSE Sensex (.BSESN) lost 0.40% to 77,418.06, as of 9:48 a.m. IST.
Nine of the 16 major sectors declined. The IT index (.NIFTYIT) fell 1.4%, topping sectoral losses.
The broader small-caps (.NIFSMCP100) traded flat while mid-caps (.NIFMDCP100) fell 0.5%.
"Two developments during the last several hours are likely to impact the market today, one, Brent crude has spiked above $91 on escalation of Mideast tensions and two, the U.S. 10-year bond yield has risen, which is negative for foreign inflows," said VK Vijayakumar, chief investment strategist at Geojit Investments.
Foreign portfolio investors were net sellers in Indian markets on Monday, with outflows worth 25.35 billion rupees ($265.00 million), the highest in three weeks.
Higher U.S. bond yields can reduce the appeal of emerging-market investments for foreign investors by offering comparatively safer returns on U.S. debt.
Among local stocks, Colgate-Palmolive India (COLG.NS) fell 3% after several brokerages raised margin concerns, following an analyst meeting.
"While the meeting reinforced the company's growth agenda, category expansion and premiumisation opportunities, we see a trade-off between faster growth and margin protection, supporting our view of modest earnings growth," said Vismaya Agarwal, analyst at Citi Research.
Bucking the trend, industrial machinery maker Indo-MIM (IDOM.NS) jumped 10% after posting a 32% rise in the June-quarter profit.
Highway Infrastructure (HIGA.NS) gained 4% after bagging a contract from the National Highways Authority of India, worth 801.7 million rupees.
($1 = 95.6600 Indian rupees)
