Nifty, Sensex Crash: Investor Wealth Erodes by ₹10.7 Lakh Crore as Nifty Hits 5-Month Low

Indian equities ended Tuesday, September 15, with deep cuts as the positive start to the session quickly gave way to selling across most parts of the market. Rising crude oil prices, a fresh spike in global bond yields and weakness in overseas equities kept buyers on the sidelines through the second half of the session.

The Nifty 50 closed 279.50 points or 1.19% lower at 23,118.60, while the Sensex dropped 777.94 points or 1.04% to 74,003.82. What made the session particularly weak was the reversal from the opening levels. The Nifty had started the session above 23,500 mark and marked intraday high of 23,593, before surrendering the entire gain and ending at its lowest closing level in five months.

Nifty Midcap and Smallcap Witnessed Sharp Fall; Majority of Sectors Ended in the Red

Selling was much sharper outside the largecap space. The Nifty Midcap 100 fell 2.12%, while the Nifty Smallcap 100 declined about 2.32%. Majority of the sectoral indices closed in the red, showing that Tuesday's decline was spread across the market rather than being driven by only a handful of heavyweight stocks.

Crude Above $107 Adds to India's Worries

The biggest external pressure came from crude oil. Brent crude moved above $107 per barrel as fresh attacks and supply disruptions in the Middle East kept concerns over energy availability alive. Brent was trading around $107.8 during the session, up about 2%.

High crude prices are particularly uncomfortable for India because the country imports a large share of its oil requirement. A prolonged rise in energy prices can widen the import bill, put pressure on the rupee and add to domestic inflation. That, in turn, can reduce the room available to the Reserve Bank of India on interest rates.

US Treasury Yield Above 5% Hurts Risk Appetite

Adding to the pressure was another rise in US bond yields. The benchmark US 10-year Treasury yield climbed above 5% and touched its highest level since 2007. Higher oil prices, persistent inflation concerns and expectations of tighter US monetary policy have pushed yields higher.

For equity markets, a 5% plus yield on US government bonds is a difficult backdrop. Higher risk-free returns make equities relatively less attractive and also raise borrowing costs across the economy. Emerging markets such as India can additionally face pressure if higher US yields strengthen the dollar and encourage capital to move towards US assets.

Investor Wealth Erodes by Nearly ₹10.7 Lakh Crore

The extent of the broader market decline was also visible in the erosion of investor wealth. The total market capitalisation of BSE listed companies fell from around Rs 483.10 lakh crore on September 11 to about Rs 472.41 lakh crore on September 15.

This translates into an erosion of approximately Rs 10.69 lakh crore in investor wealth between the two trading sessions. The sharp fall in midcap and smallcap stocks contributed significantly to the decline in overall market capitalisation.

US Futures Trade Lower

The mood remained cautious in the US as well. Dow Jones Futures were down around 0.37%, S&P 500 Futures declined 0.29%, while Nasdaq 100 Futures were lower by about 0.28%.

European Markets Also Under Pressure

European markets also remained under pressure, with France’s CAC 40 down around 0.3% and Germany’s DAX slipping about 0.2% in Tuesday’s trade

The pressure in Europe came from a combination of rising oil prices and higher bond yields. Costlier energy has revived concerns that inflation could remain stubborn, forcing central banks to maintain tighter monetary conditions for longer. European banking shares also weakened after concerns emerged over the outlook for investment banking earnings. With the US Federal Reserve decision due this week, investors remained reluctant to take aggressive positions.