Mumbai:Rising US fiscal concerns and a spike in US and Japanese bond yields fueled a global sell-off in risky assets. The Indian equity benchmarks corrected sharply on Thursday. The BSE Sensex dropped 645 points, or 0.79 per cent, to close at 80,952, while the NSE Nifty declined 204 points, or 0.82 per cent, to end at 24,609. During the session, Sensex slid over 1,100 points while the Nifty dipped below 24,500.
The sharp downturn spared no corner of the market, dragging down even midcap and small cap stocks in a sweeping rout. The Nifty midcap 100 and small cap 100 indices also declined alongside the benchmark, with the Nifty Midcap 100 Index falling 0.52 per cent and the Nifty Smallcap 100 Index correcting by 0.26 per cent. Market breadth turned negative, with declining stocks outnumbering advancing ones, as indicated by a BSE advance-decline ratio of 0.82. Baring Nifty Media Index, all sectoral indices ended the day in the red. Amongst them, Nifty FMCG, IT, OIL & GAS and Consumer durables fell the most. The total market capitalisation of all listed companies on the BSE fell by Rs 1.86 lakh crore to Rs 439.32 lakh crore.
Mahindra & Mahindra, Infosys, and Reliance Industries were the primary contributors to the Nifty index decline. On the day of Nifty weekly expiry, trading volumes on the NSE cash market were 7 per cent higher compared to previous session. Investor sentiment has remained fragile since Moody’s downgraded the U.S. credit rating last Friday, citing concerns over the country’s rising debt burden. The downgrade has intensified global risk aversion, weighing on both Wall Street and Asian markets. Yields on longer-dated U.S. Treasuries hit their highest levels in 18 months.
The yield on 30-year Treasury bonds remained above 5 per cent after hitting a 1.5-year high in Asian trade. Prashanth Tapse, senior vice-president (research) at Mehta Equities said, “Indian equities followed their global counterparts and witnessed major sell-off after a sharp spike in US and Japanese bond yields made investors risk averse towards equities.”
“With Foreign Institutional Investors turning net sellers in the past few sessions, further uptick in global bond yields could prompt overseas investors to flee risky assets across the emerging markets. Also volatility could intensify ahead of next week’s F&O expiry and hence markets could see sharp sideways movement,” he added. The Indian Rupee continued its weakening trend, falling 36 paise to settle at 86 against the US dollar, marking its lowest close since April 11th. This depreciation can be attributed to several factors: a narrowing yield differential between Indian and US assets, which is making Indian investments less attractive, persistent dollar demand from banks, and weakness in equity markets.
