Indian equities came under intense selling pressure on Thursday, September 24, as a combination of rising US Treasury yields, elevated crude oil prices and renewed uncertainty over the US-Iran conflict triggered a broad-based risk-off move.
At 1:45 pm, the BSE Sensex was down 1,040.56 points, or 1.39%, at 73,787.69. The index had opened at 74,272.40 and touched an intraday low of 73,783.84, remaining close to the day's weakest level.
The Nifty was down 313.65 points, or 1.34%, at 23,133.15. It opened at 23,221.80 and touched an intraday low of 23,132.15.
The sell-off was not confined to large-cap stocks. Nifty Midcap Select fell 2.97%, while Nifty Midcap 50 and Nifty Midcap 100 declined 1.98% and 1.74%, respectively. The Nifty Smallcap 100 was also down 1.25%.
The market's volatility gauge reflected the sharp deterioration in sentiment. India VIX jumped 21.84% to 12.59 from 10.35 in the previous session, indicating that traders were pricing in greater near-term volatility.
Bond yields and rate fears unsettle investors
A sharp rise in global bond yields has emerged as one of the principal triggers for the sell-off.
The US 10-year Treasury yield climbed to around 5.11%, its highest level since 2007, after stronger-than-expected US business activity fuelled expectations that interest rates could remain higher for longer. The two-year Treasury yield also briefly crossed 4.9%, its highest level since May 2024.
Japan's 10-year government bond yield also climbed to 3.06%, its highest level since August 1996.
Stronger US economic data have raised expectations of further Federal Reserve tightening. According to market data reported on Thursday, traders were assigning a 66% probability to an October rate hike, up from 53% earlier in the day.
Higher bond yields can put pressure on equity valuations because fixed-income assets become relatively more attractive, while higher borrowing costs can weigh on economic activity and corporate earnings.
The rise in US yields has also added pressure to emerging-market assets, including the rupee. The Indian currency fell 14 paise to 95.87 against the US dollar in early trade amid the rise in crude prices and bond yields.
Oil crosses $100 as US-Iran uncertainty persists
Crude oil has added another layer of pressure for Indian markets.
Brent crude moved back above $102 a barrel after having fallen below $99 earlier in the week. The increase has raised concerns for oil-importing economies such as India because higher crude prices can increase the import bill, add to inflationary pressure and weigh on the rupee and corporate margins.
The oil market is also closely tracking developments in the US-Iran conflict and the situation around the Strait of Hormuz.
Iranian President Masoud Pezeshkian told the United Nations General Assembly that Tehran would not surrender to US pressure. His remarks contributed to the renewed rise in oil prices. Iran's security chief Mohsen Rezaei also said the Strait of Hormuz would remain closed until Iran's conditions were met.
US Secretary of State Marco Rubio has said reaching an agreement with Iran would require sustained negotiations, while the US has continued to indicate that military options remain available.
For India, prolonged geopolitical uncertainty combined with expensive crude presents risks for inflation, the currency and the country's trade balance.
Financial stocks bear the brunt
Financial and banking shares were among the biggest casualties during Thursday's sell-off.
The Nifty Financial Services index fell 2.14%, while Nifty Bank declined 1.76% and Nifty Private Bank dropped 2.03%. Nifty Financial Services Ex-Bank fell 3.65%, while Nifty MidSmall Financial Services declined 3.69%.
Within the Sensex pack, Bajaj Finance was down more than 5%, Axis Bank around 5% and Bajaj Finserv more than 4% in afternoon trade.
The pressure on financial stocks has also been linked to the insurance regulator's latest proposals. The Insurance Regulatory and Development Authority of India has issued a consultation paper seeking to curb so-called dark patterns on insurance websites, referring to practices that can influence or manipulate consumers while they purchase insurance.
Separately, reports on Thursday said proposed changes concerning insurance commissions and distribution payouts were also weighing on insurance-related stocks. The broader market decline, however, has been driven by the combination of global macroeconomic and geopolitical concerns.
Broader market joins the sell-off
The decline has spread well beyond the benchmark indices, indicating a wider risk-off move.
Nifty Midcap Select plunged 2.97%, while Nifty Midcap 50 and Nifty Midcap 100 fell 1.98% and 1.74%, respectively. Nifty Smallcap 100 was lower by 1.25%.
Financial services remained the weakest part of the sectoral market. Nifty MidSmall Financial Services declined 3.69% and Nifty Financial Services Ex-Bank fell 3.65%. Nifty Private Bank dropped 2.03%, Nifty Financial Services 25/50 declined 1.92% and Nifty Bank fell 1.76%.
Metal stocks were also under pressure, with the Nifty Metal index down 1.62%.
Defensive sectors were relatively more resilient. Nifty Pharma was down only 0.21%, while Nifty Healthcare declined 0.34%.
The weakness followed a softer global backdrop. Wall Street had ended lower in the previous session, with the Dow Jones Industrial Average falling 0.68%, the S&P 500 declining 0.75% and the Nasdaq dropping 1.13%. Rising Treasury yields and higher oil prices were among the factors weighing on US equities.
Asian markets were mixed, adding to the cautious environment for Indian equities.
The Indian market had closed higher on Wednesday, with the Nifty gaining 117.80 points, or 0.50%, to 23,446.80 and the Sensex rising 299.17 points, or 0.40%, to 74,828.25.
Thursday's reversal therefore reflects the renewed impact of global bond yields, crude prices and geopolitical uncertainty on investor sentiment, with the pressure extending from large-cap stocks to financial, mid-cap and small-cap segments.