Indian equity benchmarks extended their losing streak for the fourth consecutive session on Thursday, with investors grappling with a combination of persistent foreign institutional investor (FII) selling, elevated bond yields, a weakening rupee and high crude oil prices. The pressure was broad-based, with the Nifty 50 and Sensex opening lower and falling further during intraday trade, while the Bank Nifty also declined.
The sustained selling comes as Indian equities head towards an eighth straight weekly decline, which would mark the first such streak since 2001. Concerns over global yields, currency weakness and the possibility of higher domestic interest rates have added to the pressure on risk assets.
The Nifty 50 opened at 22,543.7 and slipped to an intraday low of 22,301.3, while the BSE Sensex started at 72,192.89 and fell to 71,527.98, registering a loss of 952 points or 1.3%. The Bank Nifty declined 0.7%.
The Nifty Auto was also among the sectoral indices under pressure, while the broader market remained cautious as investors assessed the possibility of tighter monetary policy.
Here are five key reasons weighing on Indian equities.
1. Higher bond yields
Higher US Treasury yields have remained negative for risk assets such as emerging-market equities and currencies. Global bonds recorded their largest monthly losses in years in September, pushing yields higher amid concerns over deteriorating government finances, heavy debt issuance and rising inflation.
Indian bond yields also edged higher on Thursday, with market participants turning their attention to the RBI’s monetary policy decision due next week.
2. Weak rupee
The Indian rupee weakened alongside other Asian currencies as the dollar index climbed to a more than three-month high amid rising US Treasury yields.
The rupee fell 0.16% to 95.9850 per dollar, remaining above the 96 level, even as state-run banks sold dollars, likely on behalf of the Reserve Bank of India.
Asian currencies declined between 0.1% and 0.4% as the dollar index scaled fresh highs, with the surge in US Treasury yields continuing despite data showing that US inflation rose less than expected in August.
3. Sustained FII selling
Foreign institutional investors have intensified their selling, pulling out more than ₹20,000 crore from Indian equities over the past two trading sessions.
Provisional exchange data showed that FIIs sold more than ₹10,148 crore on Wednesday and around ₹10,743 crore a day earlier, taking their total selling for the week to more than ₹26,000 crore.
The selling comes as the Nifty and Sensex head towards an eighth consecutive weekly decline, which would be their first such streak since 2001.
V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said FIIs sold equity worth ₹20,128 crore in the last two trading sessions. He noted that with the US 10-year bond yield rising further to 5.3%, foreign selling could continue.
Vijayakumar also pointed to an apparent contradiction in FII activity: while FIIs sold ₹45,536 crore through exchanges in September, they invested ₹9,676 crore through the primary market. He said stronger US bond yields and expectations of further weakness in Indian large-caps could explain the divergence.
4. RBI rate hike concerns
Markets are widely expecting a 25 basis point rate hike, with around 100 basis points of tightening priced in over the next 12 months.
“The rate cycle looks to be turning. After holding through 2026, the RBI faces growing pressure to raise rates at its October review, and a 25 basis point hike to 5.50% is now a real possibility,” said Rajeev Sharan, Head of Research, Brickwork Ratings.
Sharan said the case for a hike had strengthened as retail inflation climbed to 4.82%, crude remained above $100, the rupee weakened past 96 and the Federal Reserve’s recent hike narrowed the rate gap. However, inflation remains within the target band and price pressures are not yet broad-based, which could persuade the RBI to hold rates with a hawkish stance. He added that a rate cut was off the table for now.
5. High crude oil prices
Crude oil prices remained elevated on Thursday as investors weighed recovering Gulf crude exports, a surprise rise in US inventories and renewed US-Iran diplomatic efforts to end the Middle East conflict.
Brent crude futures rose 0.6% to $98.67 a barrel by 0704 GMT, while US West Texas Intermediate crude gained 0.5% to $90.09 a barrel.
Both benchmarks had declined more than 1% during the session before recovering their losses. Brent recorded a monthly gain of around 14% in September, its biggest since July, while WTI rose about 5% during the month.
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