Indian stock market indices suffered heavy losses in morning trading on Friday, September 11, reflecting weak global trends. The Sensex fell over 740 points, or 1%, to end at 74,160, while the NSE Nifty 50 barometer fell around 250 points, or 1%, to hit an intraday low of 23,231.
The sell-off was broad-based with the BSE 150 Midcap and 250 Smallcap indices falling up to 1.5%.
Investors lost about ₹6 lakh crore in the first five minutes of trading as the total market capitalization of BSE-listed companies fell to almost ₹478 lakh crores out of almost ₹484 million crore in the previous session.
Sale on the world market
US stocks fell overnight as increases in key inflation data heightened market concerns. Moreover, rising tensions between the US and Iran also weighed on sentiment.
The Dow Jones Industrial Average and S&P 500 fell 0.6% each, while the Nasdaq Composite fell 0.65%. The MSCI index of global shares fell 0.66%.
Asian markets suffered deeper losses as global bond yields rose as fears of a surge in inflation mounted and monetary policy tightened.
Japan’s Nikkei, Korea’s Kospi and Taiwan’s Taiwan Weighted fell 3%.
Why is the Indian stock market falling today?
Experts find three key factors behind the collapse of the Indian stock market:
1. Oil is above $108 per barrel.
Benchmark Brent crude regained $108 a barrel after fighting between Yemen-based Houthi militants and Saudi-backed forces intensified, raising concerns about deeper supply disruptions from the region.
“Market opposition is increasing due to the escalation of conflict in the Middle East. Brent crude has jumped to around $108. If this high price continues or worse, rises further, the impact on India’s GDP growth and hence corporate earnings will not be negligible,” noted VK Vijayakumar, chief investment strategist at Geojit Investments.
2. Rising US bond yields
Rising yields in the US are a major factor behind the fall in global stock markets, as they could potentially trigger a massive outflow of foreign capital.
US 10-year yields hit 4.98% on Friday amid concerns about inflation and rising US debt. According to experts, the market is nervous about the prospect of a rate hike by the US Federal Reserve, which also leads to higher yields.
“A strong headwind is the rise in US bond yields. The 10-year yield, currently at 4.98%, is approaching the 5% mark, which many see as a possible inflection point for global equities. A correction in the global stock market is likely, but the timing is difficult to predict,” Vijayakumar said.
3. The US-Iran war is intensifying
The war between the US and Iran has intensified, dashing hopes for a short-term resolution to the conflict between the two countries.
US President Donald Trump on Thursday (local time) reportedly said he has no regrets about the ongoing war with Iran, even though the conflict could have an impact on the November US midterm elections.
Meanwhile, the Iran-backed Houthi rebel group on Thursday gained control of the Yemeni port city of Mocha and advanced towards the Red Sea coast towards strategic islands, raising fears that the disruption to oil supplies will spread to regions beyond the Strait of Hormuz.
Additional factors
Apart from the above three key factors, the influx of initial public offerings (IPOs), the expectation of a rate hike by the US Federal Reserve next week and the depreciation of the rupee against the US dollar are also key factors behind the decline in the domestic market.
“The booming Indian IPO market is now the center of attraction for investors. Significant oversubscription and attractive listing returns have attracted millions of investors to the IPO market. This has taken a lot of money away from the secondary market,” Vijayakumar said.
Additionally, most experts believe the Fed could raise interest rates on Sept. 16 after data Thursday showed the August Producer Price Index rose 0.4% following an upward revision of 0.1% in July data.
Moreover, the Indian rupee was down 27 paise at 95.79 against the US dollar in early trade on Friday.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The opinions and recommendations expressed are those of the individual analysts or brokerage firms and not Mint. We advise investors to consult with certified experts before making any investment decisions as market conditions can change rapidly and circumstances may change.