India's Sensex slumps to 32-month low on oil surge, foreign exodus

India's Sensex and Nifty 50 stock indices plummeted to their lowest levels in 32 months and 18 months, respectively, on Thursday. The decline was driven by escalating oil prices, surging global bond yields, and a weakening Indian rupee, which amplified inflation concerns. The central bank's recent hawkish rate hike, aimed at curbing inflation, added to the pressure exerted on the Indian equity market.

The Nifty 50 closed 1.64% lower at 22,231.8 points, while the Sensex dropped 1.44% to 71,593.24 points. This downturn marked the 50-stock index's lowest close in 18 months. Foreign investors intensified their selling activities, offloading a net 469.9 billion rupees ($4.86 billion) in nine days, resulting in year-to-date outflows of a record $30.4 billion.

The 50-stock index has declined nearly 15% year-to-date, while the MSCI's emerging markets index has surged by 23%, driven by investments in AI-linked stocks. The rout highlights the potential for prolonged pressure on Indian equities due to tighter domestic policy, elevated crude prices, and relentless foreign selling. Both the Nifty 50 and Sensex slipped into oversold territory following a brief recovery last week, with their relative strength indexes falling below 30, indicating heavy selling.

All 16 major sectors experienced a decline on Thursday, with small and mid-cap stocks losing 2.3% and 2.5%, respectively. The three largest benchmark stocks, HDFC Bank, ICICI Bank, and Reliance Industries, fell by 1.5%, 0.6%, and 2.5%, respectively. Market experts attribute the current market pressure to a combination of factors, including rising global bond yields due to inflation concerns, a weakening rupee, sustained foreign investor outflows, and the persistent impact of high oil prices.

G Chokkalingam, founder and head of research at Equinomics Research, explained that the interconnected factors, all linked to elevated oil prices, are currently burdening the Indian equity market. Brent crude oil prices surged 4% to over $104 a barrel following Gulf shipping attacks and a US hurricane, exacerbating supply concerns.

The Reserve Bank of India raised its benchmark repo rate by 25 basis points to 5.5% on Wednesday, signaling more rate hikes to combat the uptick in inflation. Despite the market losses, analysts still expect TCS to report an 11.2% year-on-year increase in quarterly revenue and a 14.2% rise in profit. Paytm, One Mobikwik, and Pine Labs witnessed a sharp decline of 5.2%, 4.5%, and 4.4%, respectively, following reports that the planned October 15 rollout of merchant fees on certain digital-payment transactions might be delayed by a few months.