Sensex Falls Over 1,000 Points, Nifty Drops Below 22,900 As Oil Prices And Global Yields Hit Markets

On Monday, Indian benchmark indices experienced a significant drop, marking their longest weekly losing streak since 2020. The decline was primarily driven by rising crude oil prices and a surge in global bond yields following US President Donald Trump's rejection of Iran's proposal to reopen the Strait of Hormuz. The BSE Sensex fell by 1,063 points (1.43%) to 72,832, while the NSE Nifty 50 dropped 333 points (1.4%) to 22,807.

Consequently, the combined market capitalization of BSE-listed companies decreased by ₹5.82 trillion to ₹476.06 trillion, from ₹481.88 trillion in the previous session. All sectoral indices traded lower in early trading, and the broader market faced selling pressure as midcap and smallcap indices declined by around 1%.

Oil prices and global yields were exacerbating the market conditions, with Brent crude trading above $107 and the US 10-year bond yield hovering around 5.2%. This heightened market volatility came in the wake of Trump's refusal to accept Iran's proposal to resolve the conflict, while Iran insisted that diplomacy was the only viable path forward. The uncertainty surrounding the situation had a negative impact on global equity, oil, and bond markets.

Most Asian markets, including South Korea, which fell by 2%, and Japan's Nikkei, which slipped by 0.10%, also experienced declines. Chinese markets were down more than 1%. The increase in oil prices could potentially lead to higher inflation risks and widen India's current account deficit, given the country's heavy reliance on crude imports.

Foreign investors resumed selling their holdings in Indian equities, with bond markets also facing pressure due to inflation concerns. US two-year bond yields rose by five basis points to 4.90%, and 10-year yields increased by four basis points to 5.20%. As a result, emerging markets like India became less attractive to foreign portfolio investors (FPIs).

In September, FPIs sold Indian equities worth ₹17,131 crore, with total outflows for the year reaching ₹2.41 trillion.