Mumbai: Indian equities fell on Thursday as rising US bond yields, higher oil prices and a weaker rupee unsettled investors. At 12.33 pm, the Sensex was down more than 850 points near 73,950, while the Nifty 50 had lost over 250 points and traded around 23,150.
US bond yields surge
The US 10-year Treasury yield rose to about 5.11 percent, its highest since 2007, after data showed American business activity growing at its fastest pace in more than five years. Higher bond yields can pull money away from shares and reduce the appeal of riskier investments.
Fed rate fears grow
Strong US data raised expectations of another Federal Reserve rate hike. Futures traders priced a 66 percent chance of an October increase, up from 53 percent earlier. Higher US rates could keep borrowing costs elevated and weigh on emerging markets.
Oil climbs above USD 102
Brent crude rose back above USD 102 a barrel after falling below USD 99 on Wednesday. Uncertainty over US-Iran talks and the Strait of Hormuz revived supply concerns. Higher oil prices can increase India’s import bill, fuel inflation and squeeze company margins.
Rupee weakens
The rupee fell 14 paise to 95.87 against the dollar in early trade. Higher oil prices, rising US yields and foreign investor selling kept currency traders cautious. A weaker rupee also makes imports costlier.
Financial shares lead losses
Banks and finance companies drove much of the index decline. Bajaj Finance fell more than 5 percent, while Axis Bank and Bajaj Finserv lost 3-4 percent. The private bank and financial services indices dropped about 2 percent each.
The sell-off reached broader markets, with mid-cap and small-cap indices down around 1 percent. On the NSE, 2,019 stocks declined against 679 advances.
Geojit Financial Services’ V K Vijayakumar said high crude prices and US yields could limit a quick recovery. Investors will watch those indicators and whether selling in financial stocks eases.
