Sensex Tumbles Over 950 Points, Nifty Slips Below 22,400 as Market Sell-Off Deepens

Indian equities came under another wave of selling on Thursday, October 1, extending their decline for a fourth straight session as investors grappled with persistent foreign outflows, rising bond yields, a weaker rupee and elevated crude oil prices. 

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The Sensex dropped as much as 952 points, or 1.3%, to an intraday low of 71,527.98. The Nifty 50, which opened at 22,543.7, slipped to 22,301.3 during the session. Bank Nifty was also under pressure, falling 0.7%. 

The latest fall puts the benchmark indices on course for an eighth consecutive weekly decline. If that happens, it would be their first such losing streak since 2001. 

Foreign Investors Step Up Selling 

Persistent selling by foreign institutional investors has remained one of the biggest pressures on the market. 

FIIs sold more than Rs 20,000 crore worth of Indian equities over the previous two trading sessions. Provisional exchange data showed foreign investors sold more than Rs 10,148 crore on Wednesday after offloading around Rs 10,743 crore a day earlier. 

Their total selling for the week has now crossed Rs 26,000 crore. 

V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said FIIs sold equities worth Rs 20,128 crore over the last two sessions. He pointed to the rise in the US 10-year bond yield to 5.3% as a factor that could keep foreign selling elevated. 

Interestingly, foreign investors have taken a different approach to the primary market. While FIIs sold Rs 45,536 crore through stock exchanges in September, they invested Rs 9,676 crore in the primary market during the month. 

Rising Bond Yields Weigh on Sentiment 

The sharp rise in global bond yields has added another layer of pressure. 

Global bonds suffered their biggest monthly losses in years during September as concerns around government finances, heavy debt issuance and inflation pushed yields higher. 

Indian bond yields also moved up on Thursday, with attention now shifting to the Reserve Bank of India’s monetary policy decision due next week. 

Higher yields can make riskier assets such as emerging-market equities and currencies relatively less attractive, keeping investors cautious. 

Rupee Remains Under Pressure 

The rupee also weakened as the dollar strengthened alongside rising US Treasury yields. 

The Indian currency slipped 0.16% to 95.9850 against the dollar and remained around the 96 level despite dollar sales by state-run banks, which were likely acting on behalf of the Reserve Bank of India. 

Other Asian currencies were also weaker, declining between 0.1% and 0.4%. 

Meanwhile, the dollar index climbed to its highest level in more than three months. 

The Coming RBI Policy Review Creates More Worries for Markets 

The upcoming monetary policy review by the RBI is also being awaited by investors amid growing expectations of tightening of monetary conditions, increasing market volatility. 

A rate hike of 25 basis points along with 100 basis points of tightening in monetary conditions over the coming 12 months is priced into markets. 

According to Rajeev Sharan, head of research at Brickwork Ratings, “With inflation, rising crude prices and weakening of rupee, it has now become very much a real possibility of the RBI hiking rates by 25 bps to reach 5.50 percent.” 

However, Sharan said that as yet, inflation is still within the target range and the inflation pressure is not yet broad-based. 

Crude Oil Prices Remain Elevated 

Elevated crude prices further weighed on the cautious sentiment on Thursday. 

Brent crude futures climbed 0.6% to $98.67 a barrel at 0704 GMT, while West Texas Intermediate crude rose 0.5% to $90.09 a barrel. 

Markets were looking at rising crude exports from the Gulf, higher-than-expected US crude oil inventories, and diplomatic talks between the US and Iran. 

With foreign investments continuing to move out, yields remaining elevated and rupee weak, Indian stocks continued to take a back seat on Thursday. The forthcoming RBI monetary policy announcement has become another important event for the markets, which have been struggling for some time now.