Indian benchmark shares post longest weekly losing run in 25 years

Indian benchmark shares endured their longest weekly decline in two and a half decades, as substantial foreign selling, crude prices nearing $100 per barrel, and elevated global yields dampened risk appetite. The Nifty 50 stumbled by 3.1%, while the BSE Sensex slipped 2.7% during the shortened holiday week, resulting in eight-week losses of 8.7% and 8.4%, respectively.

These benchmarks also experienced their most precipitous weekly decline in over six months and four months, respectively. Indian markets remain shuttered on Friday for a local holiday.

Equity analyst Prasenjit Paul of Paul Asset and fund manager at 129 Wealth Fund remarked, "We are very close to the bottom. I do not expect another 10% fall from here, but neither do I see a sharp recovery in the next three to four months."

Foreign outflows topped $27.8 billion this year, while Brent crude oil prices lingered above $100 per barrel. Concurrently, the US 10-year Treasury yield hit its highest level since mid-2007. Elevated US yields render high-risk emerging market assets, including Indian equities, less appealing to overseas investors. Unless foreign investors return and crude prices recede, the Reserve Bank of India's capacity to foster growth could remain restricted, as surging oil prices might spark inflationary pressures once again, according to Paul.

The central bank is anticipated to hike interest rates by 25 basis points to 5.50% on October 7, the initial increase since 2023, based on a Reuters poll of economists. The Indian rupee slumped to a two-month low, and the benchmark 10-year yield surged to its highest level in over two years. Out of the 16 major sectors, only fifteen suffered weekly losses, with small-cap and mid-cap stocks declining by 3.4% and 3.6%, respectively.

Automobile shares plummeted 5.9%, and consumer durables dropped 6.2% as a meager monsoon exacerbated worries over demand and spending.

On the day, the Nifty 50 plummeted 0.88% to 22,421.95, and the Sensex declined 0.79% to 71,909.70. The IT sector rose 2.2% on the day, marking the sole weekly gain, up 0.5%, as US inflation proved milder than anticipated, reducing the likelihood of rate hikes.