The Nifty 50 index fell for the seventh consecutive week, closing at 23,140.5. This period of losses is the longest since the collapse that occurred in February-April 2020 during the pandemic, when the index also showed seven consecutive weeks of decline amid global sell-offs triggered by the pandemic.
On Friday, Nifty closed trading at 23,140.50, which is 205.90 points below the level of 23,346.40 recorded a week earlier. Previously, the index had reached 23,414.30 on Monday when the price of Brent crude oil dropped by 3.4 percent, but it subsequently failed to hold these gains and lost even more.
Despite a slight increase of 0.3 percent on Friday, the index remained 12.3 percent below its 52-week high of 26,373.20, yet was 4.3 percent above its low.
This week was packed with events affecting the benchmark index. These included disagreements within the Tata group, which could potentially change the ownership structure of the parent company, as well as a circular from IRDAI that reduced the market capitalization of insurance companies, and the fall in Brent crude prices to $106. There was also an NSE listing, although the company's shares fell by 0.39% from the listing price of 1792 rupees per share.
Indian markets once again highlighted their connection to global events, as yields on US Treasury bonds for 10 and 30 years reached 5.18% and 5.35% respectively. Abhay Agarwal, founder and fund manager of Piper Serica, noted: 'The main reason is the jump in US bond yields, 10-year and 30-year. Right now, this is something that, despite all US intervention efforts, is not helping. And I think this scares global investors because the last time the 10-year yield was at this level was in 2007.'
During the week, the price of Brent crude oil fell by 11.5 percent, reaching $98.59 a barrel from $111.35 on September 18. The yield on Indian 10-year government bonds rose by 5 basis points over the week to 7.119%, marking the best figure since May 18 (7.131%). The rise since the start of the war with Iran was 46 basis points, and over the last year, it was 62 basis points, according to Business Standard analysis. The rupee slightly weakened, falling by 0.06 percent over the week to 95.82 against the dollar.
Over the week, the IT sector lost 48,435 crore rupees (2.1%), and insurance companies lost 7,000 crore rupees (0.6%) in market value. PB Fintech, an insurance distribution company, lost 28,000 crore rupees or 33 percent over the entire week.
Insurance stocks suffered due to rising yields, as the BSE Insurance index fell by 2 percent over the week to 1,486.5 points. According to the NSE fact sheet, the Nifty Insurance index had already fallen by 10.5 percent over the last year as of August 31, with SBI Life, HDFC Life, and Life Insurance Corporation of India collectively accounting for over 52 percent of the index's weight.
A report by Jeffries, prepared by Supratim Datta, Prakar Sharma, and Satwik Kanabar, indicated that PB reported that the net present value (NPV) of its non-insurance business could drop to 33-40 percent of the initial NPV if the proposed IRDA commissions for health and auto insurance were implemented. The company expects the NPV in life insurance to be comparable to current levels, given higher renewal commissions in contracts. Analysts estimate that a 10 percent reduction in new business commission rates would lead to a 10-12 percent drop in profit. Furthermore, it is noted that 20 percent of the company's revenue (about 40 percent of expenses) is directed towards call center operations, and PB may slow down hiring and cut marketing in the near future. The proposed IRDAI regulations could have a significant negative impact on PB's short-term profits if implemented.
The stock decline occurred against the backdrop of the Insurance Regulatory and Development Authority of India's (IRDAI) plan to publish a consultative document that would change insurance distribution rules, potentially leading to a restructuring of commission reward systems for online aggregators like Policybazaar from PB Fintech. Shares of this company, which holds nearly a 90 percent share in the online insurance aggregator market, have been under pressure for most of the past year.
However, attention was drawn to the Tata group, as the board of directors of Tata Sons reappointed N Chandrasekaran as chairman, which drew opposition from Tata Trusts, led by Noel Tata, and became a subject of active discussion among traders. Losses across the Tata group are spread across 18 of its 23 public companies, which collectively lost 40,681 crore rupees, although gains in five other companies, including Titan and Tata Steel, helped reduce the net loss.
The market remains optimistic that both the Tata dispute and the IRDA issue can be resolved through further discussions. However, little can be done about global events that simply increase the cost of money. Agarwal added: 'India is collateral damage. And there is no way foreign investors will bring money into India, even though our yields are also rising. So I think we are just caught in this situation. Crude oil prices in India are not cooling down. And then the Reserve Bank of India is also worried about rising inflation, and this will affect prices.'