Domestic equity markets witnessed intense across-the-board selling pressure on Thursday, dragging major benchmark indices down by over one percent in afternoon trade. The 30-share BSE Sensex plummeted by more than 850 points, while the NSE Nifty 50 breached the crucial 23,200 threshold. A confluence of unfavorable macroeconomic triggers, including multi-year high US bond yields, renewed expectations of interest rate hikes, rising crude oil prices, and ongoing depreciation in the Indian rupee, combined to dampen investor sentiment.
At 12:34 pm on Thursday, the BSE Sensex traded lower by 865.86 points, or 1.16 percent, at 73,962.39. Concurrently, the Nifty 50 dropped 272.35 points, or 1.16 percent, to quote at 23,174.45. The trading session began on a subdued note, with the Nifty opening at 23,221.80 and briefly advancing to an intraday peak of 23,281.95. However, aggressive institutional offloading soon took hold, pulling the index down to an intraday low of 23,173.05 compared to its previous closing mark of 23,446.80.
Over Rs 4 Lakh Crore Wiped Off Market Capitalisation
The downturn extended well beyond large-cap equities. Broader market participants adopted an increasingly defensive posture, leading to sharp declines across mid-cap and small-cap segments. The widespread rout led to a loss of more than Rs 4 lakh crore in the cumulative market capitalisation of BSE-listed companies. Following this valuation contraction, the overall market worth of all listed entities on the exchange dropped below the Rs 480 lakh crore mark.
US Treasury Yields Surge to Highest Mark Since 2007
The primary global catalyst behind the sharp market correction was an aggressive rally in US Treasury yields. The 10-year US Treasury yield climbed to roughly 5.106 percent, marking its highest reading since 2007. This spike followed robust US business activity data, which amplified concerns among market participants that the US economy remains resilient enough to sustain borrowing costs at elevated levels for an extended period. In tandem, the short-term two-year US Treasury yield climbed past 4.9 percent. Elevated US sovereign bond yields exert valuation pressure on global equities while diminishing the risk-reward appeal of emerging market assets for foreign portfolio investors.
Resurgent Bets on Federal Reserve Rate Hikes
The spike in yields rekindled expectations of further monetary tightening by the US Federal Reserve. Bolstered by resilient macroeconomic prints, market probability estimates for an interest rate hike in October gained notable traction. This shift has exacerbated fears that global financing conditions will remain restrictive far longer than previously anticipated. For Indian equities, policy moves by the Federal Reserve carry significant implications, directly dictating US dollar liquidity, global sovereign yields, and cross-border capital allocations across emerging markets.
Brent Crude Rebounds Above $102 Amid Geopolitical Frictions
Commodity price movements contributed an additional headwind for domestic equities. Brent crude contracts rebounded firmly above $102 per barrel after recently dropping below the $99 threshold. India, being a net importer of hydrocarbons, remains acutely sensitive to elevated crude prices, which inflate the national import bill and stoke domestic wholesale and retail inflation. High oil prices also elevate logistics and operational costs for manufacturers and transport firms, eating into corporate operating margins.
The latest bounce in energy benchmarks reflects deepening geopolitical instability involving Iran and the US, alongside persistent supply uncertainties surrounding maritime traffic in the Strait of Hormuz. Prolonged disruption along key shipping corridors risks anchoring crude prices at elevated bands, creating sustained inflationary headaches for major energy-importing nations such as India.
Rupee Weakens Against the Dollar to 95.87
In foreign exchange trading, the Indian rupee depreciated by 14 paise against the US dollar in early morning trade, touching Rs 95.87 per dollar. The currency faced headwinds from the combined impact of rising global crude prices, firm US Treasury yields, and reduced risk appetite among foreign institutional investors. A weaker currency amplifies the landed cost of imported goods, complicating the domestic inflation trajectory. Although foreign exchange depreciation can yield minor competitive tailwinds for select export-focused sectors, an abrupt fall stokes fears of imported inflation and macro volatility.
