New Delhi, Oct. 1 -- Indian equity markets came under renewed selling pressure on Thursday, with the Nifty 50 and Sensex extending their declines as foreign investor outflows, elevated US Treasury yields and a weaker rupee weighed on sentiment. The Nifty slipped below the 22,350 level during the session, while the Sensex fell more than 800 points at one stage.
As of around 12:55 pm, the Nifty had fallen as much as 1.22% to 22,344, while the Sensex was down 1.14%, or more than 800 points, at 71,651. Most sectoral indices were trading in negative territory, with auto and media stocks among the biggest losers. Information technology stocks were the notable exception.
The market weakness has been linked to three key factors: sustained selling by foreign portfolio investors, liquidity being absorbed by the primary market through IPOs, and pressure from high crude prices, a weaker rupee and rising US bond yields.
Foreign investor selling has emerged as a major drag on Indian equities. FPIs sold shares worth Rs.10,148 crore on September 30, marking their biggest single-day outflow in nearly six months. Their total selling for September reached Rs.51,999 crore. Domestic institutional investors, however, purchased Rs.11,272 crore worth of equities on September 30, taking their September buying to Rs.80,619 crore.
Heavy activity in the IPO market has also added to liquidity pressures in the secondary market. According to market analyst G Chokkalingam, increased participation in new issues has absorbed funds from domestic investors, leaving less liquidity available for existing stocks.
Chokkalingam also pointed to firm crude prices and the weakness in the rupee as factors behind continued foreign selling. He said the secondary market could remain under pressure in the near term unless crude prices decline significantly or the current pace of IPO activity slows.
Global borrowing costs are adding to the pressure. The US 10-year Treasury yield moved to 5.33%, its highest level since 2002. Higher US yields can make dollar-denominated assets more attractive and add pressure to emerging-market equities.
Crude oil prices are another concern for India, which imports a large share of its energy requirements. Brent crude was trading around $99 a barrel on Thursday. Higher oil prices can increase concerns around India's import bill, inflation and corporate margins.
The rupee also weakened to around Rs.95.99 against the US dollar as the dollar strengthened alongside higher US Treasury yields. The combination of a weaker currency, expensive crude and elevated global borrowing costs has added to pressure on Indian equities.
The latest decline comes amid a broader period of weakness in Indian markets. The benchmarks were on track for an eighth consecutive weekly fall, which would be their longest such losing streak in 25 years, according to market data reported Thursday.
Published by HT Digital Content Services with permission from Millennium Post.