The domestic benchmark indices extended their losses on Thursday, October 8, after the Reserve Bank of India’s hawkish rate hike raised concerns over tighter financial conditions, while rising crude oil prices added to inflation worries.
The Nifty 50 fell 0.76% to 22,424.70, while the BSE Sensex declined 0.63% to 72,187.97, as of 10:39 IST.
The sell-off was broad-based, with 14 of the 16 major sectoral indices trading lower. The broader market also came under pressure, with both the Nifty Midcap and Smallcap indices falling around 0.8% each.
However, the IT sector bucked the broader trend, gaining 1.8%, led by a 2.5% rise in Tata Consultancy Services (TCS) ahead of its September-quarter earnings announcement later in the day.
Gaurav Arora, Head of Research at SAHI, said the market decline is more than a knee-jerk reaction to the RBI policy, with the broader macro backdrop turning increasingly risk-off.
He pointed to a combination of rising domestic interest rates, crude oil prices above $100 a barrel, a weaker rupee and elevated US Treasury yields as key pressures on equities. Arora said rallies are likely to face selling pressure until either oil prices or US yields cool, while rate-sensitive and high-valuation segments could remain under pressure.
The decline comes a day after the Nifty 50 and Sensex snapped a two-session winning streak on Wednesday, following the RBI’s decision to raise the benchmark repo rate by 25 basis points to 5.5%. The hike marked the central bank’s first rate increase in nearly four years, as it sought to address mounting inflationary pressures amid strong economic growth.
3 factors behind Sensex, Nifty 50 fall
FII selling keeps market under pressure
On the institutional front, foreign institutional investors (FIIs) remained heavy sellers on Wednesday, offloading equities worth over ₹6,121 crore. Meanwhile, domestic institutional investors (DIIs) provided some support, making net purchases of around ₹4,596 crore.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said the market remains under pressure from sustained FII selling, with the current environment turning into a “sell on rally” market. He expects this trend to persist as long as US bond yields remain elevated.
Elevated US yields weigh on India
With the 10-year US Treasury yield hovering around 5.3%, FIIs have little incentive to invest in Indian equities, Vijayakumar said, making elevated global yields a key headwind for domestic markets.
Also, Vijayakumar added that strong AI trade adds to headwinds. The continued strength of the AI trade in the US is also attracting global capital, creating another challenge for Indian equities, he added.
Crude prices hold the key
Oil prices rose on Thursday amid persistent concerns over supply disruptions from the key Middle East producing region, as attacks on shipping increased in the Gulf and Strait of Hormuz. US crude production also came under pressure as a hurricane threatened offshore output.
Brent crude futures rose $2.28, or 2.28%, to $102.28 a barrel by 0427 GMT, while US West Texas Intermediate (WTI) crude futures gained $1.66, or 1.88%, to $89.94, according to a Reuters report.
Vijayakumar said the market backdrop could change if crude oil prices decline sharply. However, there is currently no clarity on when such a decline could materialise, he noted.
Nifty 50 Outlook – What should investors do?
Gaurav Arora, Head of Research at SAHI, said the market correction appears to be an orderly reset rather than a panic-driven sell-off. He noted that India VIX remains around 14, while domestic institutional investors are absorbing a significant part of FII selling, with DIIs buying around ₹4,600 crore on Wednesday.
With the Q2 earnings season now underway, Arora said the firming up of IT stocks ahead of TCS’s results and an estimated 20–24% earnings growth for India Inc provide a fundamental cushion to the market.
On the Nifty, he identified 22,200–22,000 as the key support zone, adding that a break below this range would confirm a deeper correction. For investors, Arora recommended staying selective rather than exiting the market.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
