Indian indices Sensex and Nifty decline due to rising bond yields and oil prices

Indian benchmark indices began the trading session on Thursday with a decline, which was caused by rising bond yields, increased crude oil prices, and selling in the banking and insurance sectors.

The BSE Sensex index lost 707 points, or 0.94 percent, reaching a daily low of 74,120.62 points. By 9:25 AM, the three-component index had fallen by 575 points or 0.77 percent, standing at 74,251 points. Meanwhile, its counterpart on the NSE, Nifty 50, plummeted by 241 points or 1.02 percent, reaching the level of 23,205. According to the latest data, it was at 23,245, down by 201 points or 0.86 percent.

Most sectoral indices, with the exception of pharmaceuticals, showed a significant decline. The shares of the banking and financial sectors exerted the greatest pressure on trading.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the sharp rise in Brent crude oil prices above $102 and the increase in US 10-year bond yields to 5.11 percent would negatively affect the market. He added that as long as these two global risk factors persist, the prospects for a reasonable market recovery seem unlikely.

Key reasons for the stock market crash

There are several factors explaining today's stock market fall. Firstly, there was a surge in global bond yields, which caused concern among stock market investors. The yield on US 10-year bonds stabilized at 5.11 percent during the Asian trading session after increasing by 15 basis points in the previous session, marking the highest level since 2007. At the same time, the yield on Japanese government bonds rose by 8 basis points to 3.06 percent, a level not seen since August 1996. Higher rates reduce the attractiveness of riskier assets, such as emerging market stocks, like those in India.

Secondly, oil prices remain high. Despite a slight softening in oil prices during the day, they continue to hold above the $102 per barrel mark. Brent crude futures rose by 4 percent in the previous session due to the ongoing rift between Iran and the United States regarding the completion of their war. The Iranian President told the UN General Assembly that Tehran would never surrender to US pressure, according to Reuters.

Thirdly, the probability of an interest rate hike by the Fed is growing. US Federal Reserve officials maintained a hawkish tone amid rising inflationary pressures caused by higher oil prices. Federal Reserve Governor Michael Barr stated on Wednesday that the central bank's recent rate hike was part of efforts to adjust borrowing costs and signaled the possibility of further increases, according to a Reuters report. Now, CME FedWatch predicts a 69 percent probability of a Fed rate hike at the next meeting, up from 44 percent a month ago.

Fourthly, shares of banks and financial companies exerted downward pressure. Shares in the banking and financial sector faced intense selling pressure after IRDAI proposed reforming commission rules to limit payouts, tie them to product complexity, and extend insurer commissions for up to the first year of the policy.

Among the biggest losers in the Nifty 50 package today were HDFC Life, Bajaj Finance, Axis Bank, and Bajaj Finserv, which lost up to 8.5 percent. The banking and financial sectors constitute the largest weight in the Nifty 50 package.

Technical forecast

Shrikant Chauhan, Head of Equity Research at Kotak Securities, noted that Nifty formed a small bullish candle on daily charts and maintains a range-bound movement during the day. He added that the current market structure has no definite direction, and traders can expect sideways breakout. 'In the upward direction, the key resistance zone remains 23,500/75,000. Above 23,500/75,000, the market may move towards 23,600-23,650/75,800-76,000. On the other hand, below 23,250/74,300, selling pressure may intensify. Below this level, the market may slide to 23,150-23,000/74,000-73,600.'

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A new crisis in the stock market is possible, as evidenced by signals coming from abroad. In particular, two decisions made in the United States are causing concern among investors in India. Furthermore, the collapse of the American stock market and the movement of Gift Nifty indicate a probable significant decline in the Sensex-Nifty index. After two days of growth, the market has once again faced a threat.

After a period of prolonged stagnation, the market began to show activity. Previously, there was a continuous downward trend in the stock market. For example, before the start of the current week, the Sensex with 30 stocks and Nifty with 50 stocks showed a drop of more than 2%, leading to substantial losses for investors. However, over the last two trading days, the dynamic changed, and investors felt relief due to the rise of Sensex-Nifty. Nevertheless, new signals received by the market cast doubt on this relief.

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The indices of the Indian stock market, Sensex-Nifty, closed with strong growth on the previous trading day, Wednesday. The BSE Sensex finished trading at 74,336.45 points, demonstrating a rise of 332.63 points during the day. The NSE Nifty closed at 23,217.60 points, showing a drop of 99 points. However, signals from abroad indicate that this sharp rise may be followed by a significant decline on Thursday.

www.aajtak.inSeptember 16, 07:05

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The stock market experienced a significant downturn on Tuesday; however, on Wednesday after the opening of trading, the Sensex and Nifty indices demonstrated impressive growth. Shares of several large companies, including ITC, HCL, and BEL, also saw a sharp jump amid this market rally.

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Asian-Pacific region markets traded significantly lower, reflecting similar overnight movements on Wall Street. Traders assessed inflation prospects against the backdrop of high oil prices and rising bond yields. Japan's Nikkei 225 and South Korea's Kospi indices fell by 3% and 2.6%, respectively.

On Thursday, the Dow Jones and S&P 500 indices closed down by 0.6% and 0.58%, respectively, while the Nasdaq Composite finished the session down by 0.65%. The yield on the benchmark 10-year US Treasury bond hovered around the 5% mark, settling at 4.95% on Thursday.

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According to updates, Sensex opened 704 points or 0.94% lower at 74,198 points due to surges in oil prices and bond yields. Nifty was at 23,270 in pre-market trading, which was 207.50 points or 0.88% lower. In pre-market trading, Sensex fell by 593 points or 0.79% to 74,308.

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Vodafone Idea, State Bank of India, Texmaco Rail and Engineering, Punjab National Bank, HDFC Bank, YES Bank, and oil marketing companies are in focus for Friday's trading session.

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