Summary:
Sensex and Nifty fell around 1% on September 11 as global equities weakened, crude oil crossed $108, US bond yields neared 5% and geopolitical tensions intensified. IPO-related liquidity pressure and rupee weakness added to concerns, triggering broad-based selling.
The Indian stock market saw heavy selling pressure on Friday 11 September, in line with weak global cues and rising concerns over inflation, crude oil prices and geopolitical tensions. The Sensex dropped more than 740 points, or 1% to touch an intraday low of 74,160 while the Nifty 50 fell around 250 points, or 1% to hit a low of 23,231.
This was a broad-based decline, with mid-cap and small-cap stocks also coming under pressure. The BSE 150 Midcap and BSE 250 Smallcap indices slid up to 1.5%. Investors experienced significant wealth erosion as the market capitalisation of BSE-listed companies dropped to nearly ₹478 lakh crore from around ₹484 lakh crore in the previous session, thus losing about ₹6 lakh crore in the first five minutes of trade.
Global Market Selloff Pressures Indian Equities
Weakness in the global markets was a major factor behind the domestic market decline. The US stocks closed lower overnight after stronger data raised concerns about higher interest rates and monetary policy tightening. The Dow Jones Industrial Average and S&P 500 fell 0.6% each while the Nasdaq Composite dropped 0.65%. The MSCI’s global equity index also closed down 0.66%.
Asian markets saw sharper losses as rising global bond yields increased fears about higher borrowing costs. Japan’s Nikkei, Korea’s Kospi and Taiwan’s Taiwan Weighted index declined up to 3% indicating broader risk aversion among investors.
Crude Oil Over $108 Per Barrel, Spooks Inflation
One of the major concerns for investors was the sharp rise in crude oil prices. Brent crude moved back above $108 per barrel after heightened tensions between Yemen-based Houthi militants and Saudi-backed forces raised fears of further supply disruptions from the region.
Higher crude prices are a major concern for India which imports a significant portion of its energy requirements. A sustained rise in oil prices could hurt economic growth, raise inflationary pressure and affect corporate earnings.
US Bond Yields Near 5%, Spooks Foreign Fund
The rise in US bond yields pressed harder on global equities. The US 10-year bond yield touched 4.98% amid fears of inflation and rising government debt. Higher bond yields makes fixed-income investments more attractive against equities and could potentially drive foreign capital outflows from emerging markets.
Market participants are also concerned about the likelihood of further interest rate hikes by the US Federal Reserve which has caused uncertainty across the board.
US-Iran Conflict Intensifies Geopolitical Risks
Geopolitical tensions also impacted investor sentiment as the US-Iran conflict began to intensify. The potential of prolonged disruption in oil supply routes raised fears about prices and global economic stability. Iran-backed Houthi forces taking control of Yemen’s port city of Mocha and moving towards strategic areas near the Red Sea added to concerns about supply disruption.
Other Factors Pressing The Market
Apart from global concerns, domestic factors also played a role in the selling pressure. Robust investor participation in the IPO market has drawn liquidity away from secondary markets as heavy oversubscription and attractive listing gains has attracted retail and institutional investors.
Markets are also factoring in the prospect of a possible US Federal Reserve rate hike on 16 September after August Producer Price Index data showed a rise of 0.4%. Meanwhile, the Indian rupee fell 27 paise to 95.79 against the US dollar during early trade.
In general, the market decline reflects a confluence of global risk-off sentiment, higher crude oil prices, rising bond yields and geopolitical uncertainty. Investors are keeping a close eye on movements in crude prices, central bank policies and geopolitical conflicts for the next market move.
