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India's equity benchmarks inched lower on Monday, tracking Asian peers, as investors assessed the likelihood of Iran's response to the United States' bombing of its nuclear sites.
The indexes pared some losses as Brent crude oil futures retreated below $77 per barrel, after hitting a five-month high earlier.
The Nifty 50 (.NSEI) closed 0.56 per cent lower at 24,971.9 and the BSE Sensex (.BSESN) fell 0.62 per cent to 81,896.79, after trading as much as 1.1 per cent lower earlier in the session.
The US index futures too recovered, while the MSCI Asia ex Japan (.MIAPJ0000PUS) was down 0.8 per cent, trimming some losses.
Higher crude oil prices are a negative for India, which depends heavily on imports for its energy requirements, as they could stoke inflation and widen the fiscal deficit.
"Most of the market is not buying the argument that Iran would be able to take control of the Strait (of Hormuz) and block oil exports. Moreover, Iran also gets a substantial chunk of its own imports through that route," said Arun Malhotra, fund manager at CapGrow Capital.
Investors are worried that Iran's retaliation to the United States' attacks on its nuclear facilities may include closure of the Strait of Hormuz, through which roughly a fifth of global crude supply flows.
However, most analysts and brokerage firms, including UBS, said they do not expect a prolonged supply disruption.
Information technology stocks (.NIFTYIT), which get a significant chunk of revenue from the US, shed 1.5 per cent after Accenture (ACN.N) posted decline in outsourcing orders due to a cutback in US government spending and tariff uncertainty.
The broader, more domestically-focused mid-caps (.NIFMDCP100) and small-caps (.NIFSMCP100) added 0.4 per cent and 0.7 per cent, respectively, partly driven by gains in shipping and defence companies.
Bharat Electronics (BAJE.NS) rose 3.1 per cent, and was among top three Nifty gainers, on securing orders worth 5.85 billion rupees ($67.6 million).