The Indian stock market benchmarks suffered strong losses in morning trade on Friday, 11 September, mirroring a weak global trend. The Sensex crashed over 740 points, or 1%, to drop to 74,160, while the NSE barometer Nifty 50 plunged about 250 points, or 1%, to hit an intraday low of 23,231.
The selloff was broad-based as the BSE 150 Midcap and 250 Smallcap indices plunged up to 1.5%.
Investors lost about ₹6 lakh crore within the first five minutes of trade as the overall market capitalisation of BSE-listed firms dropped to nearly ₹478 lakh crore from nearly ₹484 lakh crore in the previous session.
Global market selloff
fell overnight as an increase 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 declined 0.6% each, while the Nasdaq Composite fell 0.65%. MSCI’s gauge of global stocks dropped 0.66%.
Asian markets suffered deeper losses amid rising global bond yields, driven by heightened concerns over an inflation flare-up and monetary tightening.
Japan’s Nikkei, Korea’s Kospi, and Taiwan’s Taiwan Weighted crashed up to 3%
Why is the Indian stock market down today?
Experts find three key factors behind the crash in the Indian stock market:
1. Crude oil above $108 per barrel
Crude oil benchmark reclaimed the $108 per barrel mark after fighting between Yemen-based Houthi militants and Saudi-backed forces intensified, raising concerns over deeper supply disruptions from the region.
“Headwinds for the market are getting stronger with the escalation in the Middle East conflict. Brent crude has shot up to around $108. If this high price sustains, or worse, spikes further, the impact on India’s GDP growth and consequently on corporate earnings will not be insignificant,” V K Vijayakumar, Chief Investment Strategist, Geojit Investments, observed.
2. US bond yields surge
Rising yields in the US are a major factor behind the fall in global stock markets, as they can potentially trigger massive foreign capital outflow.
US 10-year bond yields touched 4.98% on Friday, amid concerns over inflation and increasing US debt. According to experts, the market appears nervous about the prospect of rate hikes by the US Federal Reserve, which is also lifting yields.
“A strong headwind is the rise in U.S. bond yields. The 10-year yield, now at 4.98%, is approaching the 5% mark, which many regard as a possible inflection point for global equities. A correction in the global equity market is likely, but the timing is hard to predict,” said Vijayakumar.
3. The US-Iran war intensifies
The US-Iran war has intensified, dashing hopes of a near-term resolution to the conflict between the two countries.
As per reports, US President on Thursday (local time) said that he doesn’t regret the ongoing Iran war despite the impact the conflict may have on the November US midterm elections.
Meanwhile, Iran-backed rebel group Houthis gained control over Yemen’s port city of Mocha on Thursday and advanced toward the Red Sea coast to strategic islands, fuelling worries that the disruption of oil supplies will spread to regions other than the Strait of Hormuz as well.
Additional factors
Apart from the aforementioned three key factors, the influx of initial public offerings (IPOs), the anticipation of a rate hike by the US Federal Reserve next week, and the rupee’s fall against the dollar are also among the key factors behind the fall in the domestic market.
“The booming Indian IPO market is the centre of attraction for investors now. The heavy oversubscription and attractive listing gains have drawn millions of investors into the IPO market. This has sucked off big money from the secondary market,” said Vijayakumar.
Besides, most experts believe the Fed may increase interest rates on 16 September, after data on Thursday showed that the August Producer Price Index rose 0.4%, following an upward revision of July data to a0.1% gain.
Moreover, the indian rupee declined 27 paise to 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 views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.