Mumbai: It was a terrible Thursday in the Indian stock markets as the BSE Sensex index was down 1,247.71 points, or 1.67 per cent, at 73,580.54, and the NSE Nifty 50 tumbled 383.70 points, or 1.64 per cent, to close at 23,063.10.
There was heavy selling as all sectors came under pressure.
The Nifty Midcap 100 and Nifty Smallcap 100 declined over 2.25 per cent and 1.53 per cent, respectively. Nifty 500, which represents 92 per cent of the free-float of NSE-listed stocks, fell 1.67 per cent, reflecting a broad-based sell-off.
The markets went for a tailspin mainly due to a spike in global bond yields, rising crude oil prices and growing bets on a US Federal Reserve rate hike.
The main reason for the Thursday bloodbath was a spike in global bond yields that spooked stock market investors. The US 10-year Treasury yield spiked to 5.13 per cent, its highest level since 2007. Japanese 10-year government bond yields rose 3.07 per cent, its highest level in 30 years.
Such high bond yields bring down the appeal of riskier assets, including emerging-market equities such as India.
Crude oil prices spiked again as lack of progress in US-Iran peace talks sparked concerns among traders.
Iranian President Masoud Pezeshkian on Wednesday blamed the US and Israel for fuelling global instability.
“The United States president described us as terrorists. We have been the victims of terrorism,” Pezeshkian said in his speech at the United Nations General Assembly.
Crude oil prices jumped nearly 3% on Thursday to touch $106 per barrel once again. It’s bad news for India as higher oil prices add to the import bill, intensify inflationary fears and pull down corporate profitability.
The other major factor was expectations of a US Federal Reserve rate hike strengthening. Fed Governor Michael Barr said that the recent rate hike was aimed at recalibrating borrowing costs, and indicated that further increases may be needed, according to a Reuters report.
According to the CME FedWatch tool, there is a 73.10 per cent chance of a rate hike at the October 28 meeting, up from 44 per cent a month ago.
The Indian rupee stayed weak, sliding 11 paise to 95.84 against the US dollar. Gold also continued to fall sharply.
According to market experts, volatility is expected to remain high in the near term, with the absence of fresh positive triggers keeping investors cautious.
“Going forward, volatility could remain elevated until there is greater clarity on crude prices and global yields. A moderation in these pressures would be important for sentiment to stabilise,” said Vikram Kasat, Chief Business Officer, Advisory and Dealing at PL Capital.
