Spike in crude prices, US yields brings India’s m-cap below $5 trillion
Indian stock markets experienced a significant decline on Tuesday. Crude oil prices surged above one hundred dollars a barrel. United States bond yields climbed above five percent, impacting investor sentiment. This led to a sharp sell-off in Indi...
Market value has fallen by nearly $380 billion from around $5.3 trillion at the beginning of the year.
Mumbai: A sharp sell-off in Indian equities on Tuesday, triggered by crude oil prices surging above $100 a barrel and United States bond yields climbing above 5%, pushed the combined market value of companies listed on the BSE below $5 trillion to a three-month low. India's share of global market capitalisation also fell below 3%.
According to BSE data, the combined market capitalisation of listed companies declined to $4.92 trillion, a level last seen on June 11. Market value has fallen by nearly $380 billion from around $5.3 trillion at the beginning of the year.
India's share of global market capitalisation stood at around 2.95%, its lowest since June 3.
On Tuesday, the Sensex fell 778 points, or around 1%, to 74,003.81, its lowest level in three months and a level last seen on June 11. The Nifty dropped 280 points or 1.2% to 23,118.60, its lowest level in five months and a level last seen on April 6.
"Higher oil prices are reviving inflation concerns, while heavy government borrowing globally is pushing bond yields higher," said Kresha Gupta, director & fund manager, Steptrade Capital. "At the same time, expectations of interest rate cuts are fading, which means investors are demanding higher yields to hold bonds. As yields rise, equities become relatively less attractive, particularly in emerging markets like India."
The yield on the benchmark 10-year US Treasury rose to 5.041%, its highest since 2007, on Tuesday as rising oil prices fuelled inflation concerns. Brent crude rose above $108 a barrel on Tuesday amid concerns over oil supplies after Saudi Arabia's East-West Pipeline was shut following attacks on the country's energy infrastructure.
Investors will take cues from the US Federal Reserve's policy meeting on September 16, followed by the Bank of England on September 17 and the Bank of Japan on September 18.
Expectations of interest rate hikes have increased after US inflation came in stronger than expected, adding to the upward pressure on rising bond yields.
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The Nifty MidCap 100 fell 2.1% to a three-month low, closing at 60,878.25, a level last seen on June 12. The Nifty SmallCap 100 slumped 2.4% to end at 19,422.45, its lowest in about one-and-a-half months and a level last seen on July 31. Of the 4,667 stocks traded on the BSE, 3295 declined and 1,159 advanced.
All major sectoral indices ended lower except the Nifty IT, which gained 2.2%. Nifty Realty was the biggest loser, falling more than 4%, while Nifty Metal, Auto and Pharma declined more than 2% each.
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"Indian equities are likely to remain weak amid elevated crude prices, renewed inflation concerns and uncertainty ahead of the US Federal Reserve's policy decision," said Siddhartha Khemka, head of research, Wealth Management, Motilal Oswal Financial Services.
India has lost ground in its share of global market capitalisation this year, while the US, Taiwan and South Korea have increased their shares. The US gained more than one percentage point, with its share rising to 48.82% from 47.78% at the beginning of the year. Taiwan and South Korea followed, with their shares increasing by 0.9 percentage point and 0.8 percentage point to 3.08% and 2.58%, respectively.
