Indian stock market value drops below $5 trillion as oil prices surge & US bond yields climb

On Tuesday, the Indian stock market value plunged below $5 trillion, marking a three-month low, as crude oil prices surged above $100 per barrel and US bond yields climbed above 5%. India's share of global market capitalisation fell below 3%, its lowest since June 3.

The combined market capitalisation of listed companies on the Bombay Stock Exchange (BSE) dropped to $4.92 trillion, a level not seen since June 11. This represents a nearly $380 billion decline from the beginning of the year, when the market value stood at around $5.3 trillion.

The Sensex, a key index in India, fell 778 points, or around 1%, to 74,003.81, its lowest level in three months. The Nifty index also dropped 280 points, or 1.2%, to 23,118.60, its lowest level in five months.

Kresha Gupta, director and fund manager at Steptrade Capital, attributed the market sell-off to rising oil prices, which are reigniting inflation concerns. Global government borrowing is pushing bond yields higher, making equities less attractive to investors, especially in emerging markets like India. The yield on the benchmark 10-year US Treasury reached 5.041%, its highest since 2007, due to concerns over oil supply disruptions.

Major sectoral indices also ended lower, with the Nifty IT gaining 2.2% as the sole exception. The Nifty MidCap 100 and Nifty SmallCap 100 both hit three-month lows, while other sectors such as Nifty Realty, Nifty Metal, Nifty Auto, and Nifty Pharma declined by over 2% each.

Experts predict that Indian equities will remain weak, given the elevated crude prices, renewed inflation concerns, and uncertainty surrounding the upcoming US Federal Reserve policy decision on September 16. The US share of global market capitalisation has increased to 48.82%, up from 47.78% at the beginning of the year, while Taiwan and South Korea have also gained shares, with their shares rising by 0.9 percentage point and 0.8 percentage point, respectively.