India benchmark shares log worst month since March as oil, global rate hikes spark outflows

Indian equity benchmarks hit their weakest monthly performance since March, with the rupee and benchmark bonds also experiencing losses. Foreign investors pulled out $2.7 billion in Indian shares in September, adding to year-to-date outflows of $26.8 billion. The US Federal Reserve increased interest rates in September, as did central banks in Australia, Europe, and Japan.

Rising oil prices and higher US rates make bonds and the dollar more appealing investment options, negatively impacting emerging market stocks. Sunny Agrawal, head of fundamental equity research at SBICAPS Securities, noted that the weak global macro environment, Middle East tensions, and a busy local IPO market contributed to the market's decline.

The Nifty 50 fell 6.1% to 22,620.45, while the BSE Sensex dropped 5.8% to 72,480.29. September marks the benchmarks' second consecutive monthly decline. Analysts anticipate limited downside risk after recent losses but expect recovery to be limited by ongoing Middle East risks and earnings recovery. The rupee, along with Asia's other currencies, saw significant declines in September and Q1.

All 16 major sectors suffered losses in September, with IT and financial services sectors taking the biggest hits. Tata Group stocks, including Tata Investment Corp, Tata Chemicals, and Tata Motors Passenger Vehicle, drew particular investor attention amid focus on Tata Sons' upcoming listing. Coal India, however, saw gains due to optimistic demand and earnings outlook. HDFC Bank, despite a 11% slide over two months, remained relatively stable in September.