Sensex Dives Over 700 Points, Nifty Tumbles Below 23,250 on Oil and Bonds

India's stocks were seen trading in red opening bell on Friday, September 11, amid surging oil prices, higher US bond yields, and weakening in global markets. 

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The Sensex started its trading at 74,309 levels and soon tumbled to an intraday low level of 74,160, sliding 742 points, or 1%. The Nifty 50 opened its trade at 23,270 levels and tumbled further to 23,231 levels, a decline of 246 points, or 1.05%. 

The Sensex was seen declining 630 points, or 0.84%, to 74,270, and Nifty was seen falling 222 points, or 0.94%, to 23,256, as of 9:27 am. 

The decline was seen across all sectors, as every sectoral index was seen trading in red in early trade. 

Realty and Metal Shares Among the Hardest Hit 

Realty shares bore the brunt of the pressure, with the Nifty Realty index sliding by more than 3.5%. The Nifty Metal index fell by 2.8% as the Nifty Bank index declined by more than 1%. 

Selling activities also spread beyond the select sectors to the wider market. The Nifty Midcap 100 index and Nifty Smallcap 100 index fell by 1.3% each. 

Market breadth indicated the magnitude of weakness, with as many as 2,377 stocks lower against 504 gains, while close to 90 stocks were flat. 

The India VIX, which is widely watched as an indicator of market volatility, surged by more than 6% to 12.5. 

Tech Mahindra, Infosys, HCL Tech, Bajaj Finance and ITC were some of the Sensex stocks higher by up to 1.5%. 

M&M, Bajaj Finance, Tata Steel, IndiGo and UltraTech Cement were some of the worst performers among the large-cap stocks, declining by more than 2% each. 

Rise in Crude Oil above $100 

Rise in crude oil prices was one of the major reasons behind weakness in Indian stocks. 

Price of oil was heading for the first close above $100 a barrel since mid-May. 

Brent crude oil futures increased by 0.42% to $108.1 a barrel, whereas US West Texas Intermediate crude increased by 0.33% to $102.8. 

The rise in energy prices has created fears of negative impact on the growth and earnings of Indian economy, further increasing the risk-off sentiment in Indian equities. 

U.S. Bond Yield Approaches 5% 

One other factor that put pressure on Indian equities was US bonds. 

U.S. 10-year Treasury yield jumped to 4.96%, highest since late 2023. 

The rise in yield has occurred in tandem with expectations of tightening of monetary policy in the U.S., as probability of interest rate hike by Federal Reserve has been assigned. 

Higher bond yield may put pressure on stock market by increasing attractiveness of fixed income securities along with higher borrowing cost. 

IPO Boom Draws Money Towards Primary Market 

The surge in activity in India’s primary market was another factor highlighted in the report. 

Strong IPO subscriptions and attractive listing gains have drawn millions of investors towards new public offerings, diverting some money away from the secondary market. 

The focus on the primary market has intensified further with the NSE announcing the price band and subscription dates for its much-awaited IPO. 

Asian Markets Join Global Sell-Off 

The weakness in Indian equities followed a broader decline across Asian markets as higher oil prices and bond yields pushed investors towards a more cautious stance. 

Japan’s Nikkei 225 was down 2.8%, while South Korea’s Kospi fell 2.3%. Australia’s S&P/ASX 200 declined 1.2%. 

U.S. equities had also closed lower overnight after stronger producer inflation data revived concerns about another interest-rate increase. 

The Dow Jones Industrial Average fell 0.6%, the S&P 500 lost 0.5%, and the Nasdaq Composite ended 0.65% lower. 

European Central Bank Raises Rates 

Pressure from interest rates was visible in Europe as well. 

European stocks fell to two-month lows after the European Central Bank raised interest rates for the second time this year as it responded to higher inflation. 

The ECB’s benchmark deposit rate now stands at 2.5%, at the upper end of the range policymakers consider neutral for economic activity. 

Attention is also turning to Japan, where the Bank of Japan is expected to raise interest rates to 1.25% following its meeting next Friday. 

For Indian equities, Friday’s early sell-off reflected several pressures arriving at the same time: crude oil above $100 a barrel, the U.S. 10-year yield approaching 5%, weakness across overseas markets and strong investor activity in the primary market. By 9:27 am, the Sensex remained 630 points lower and the Nifty was trading at 23,256.