Indian equity markets experienced a sharp downturn on Thursday, with benchmark indices recording significant losses amid a wave of global economic uncertainty. By 2:15 PM, the BSE Sensex had shed 1,155 points, or 1.54%, to trade at 73,673.50, while the Nifty50 fell 370 points, or 1.58%, to 23,076.55. The sell-off was broad-based, affecting both large-cap stocks and the broader market, as evidenced by a 1% decline in both the Nifty Midcap 100 and Nifty Smallcap 100 indices.
Investor sentiment was primarily dampened by a surge in US Treasury yields, which reached levels not seen in nearly two decades. The 10-year US Treasury yield climbed 13.89 basis points to 5.106%, the highest since 2007, following data showing robust US business activity. This rise in yields, coupled with a 66% probability of a Federal Reserve rate hike in October, prompted investors to shift capital toward fixed-income assets. Additionally, crude oil prices rebounded above $102 per barrel, further exacerbating market anxiety.
Financial stocks bore the brunt of the selling pressure. Bajaj Finance led the decline on the Sensex with a drop of over 5%, while Axis Bank and Bajaj Finserv fell between 3% and 4%. The insurance sector faced a particularly severe correction following regulatory proposals from the Irdai aimed at curbing distribution costs and mis-selling. PB Fintech, the operator of Policybazaar, saw its shares plunge 30% to Rs 1,320.10, wiping out approximately Rs 26,200 crore in market capitalization. Similarly, Turtlemint Fintech Solutions hit a lower circuit after falling 20% to Rs 109.04.
The Indian rupee also weakened, declining 14 paise to 95.87 against the US dollar. Jateen Trivedi, VP Research Analyst at LKP Securities, noted, "The rupee continues to hover in the 95.60-95.95 zone, with persistent FII selling in Indian markets keeping sentiment cautious. Going ahead, US-Iran developments, Xi Jinping’s US visit and UN meeting updates could keep currency markets volatile."
Market experts suggest that the current headwinds are unlikely to subside quickly. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated, "The rise in Brent crude above $102 and the US 10-year Treasury yield climbing to 5.11% are likely to remain key pressures for the market." He added that a strong recovery remains improbable while these global factors persist, though he noted that growth-oriented stocks in the mid- and small-cap segments continue to see interest despite high valuations.
