Market rout deepens as crude surge, high US yields batter Indian equities

Mumbai: Domestic stock gauges hurtled to their lowest close this fiscal year in Monday's meltdown, accelerating a grinding slide that began about three weeks ago. Oil spiked on receding hopes of an imminent breakthrough in the Iran crisis, while high US bond yields - the steepest this millennium - roiled emerging markets in Asia.

Brent crude rose above $108 a barrel after Washington rejected Tehran's conditional proposal to operate the Strait of Hormuz. However, prices were cooling a bit late in the night (India time) as Qatari mediators held talks with Iran and the US on a possible peace deal.

The NSE Nifty 50 fell 360.25 points, or 1.56%, to close at 22,780.25, while the BSE Sensex declined 1.48%, or 1,124 points, to end at 72,771.72. Both benchmarks closed at their lowest levels since March 30.


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Among benchmark stocks, Tata Motors PV was the biggest loser, falling 3%, followed by Adani Enterprises and Jio Financial Services, which declined 2.9% each. Heavyweights Reliance Industries and HDFC Bank lost 2.3% each.

The selloff wiped out more than Rs 7.5 lakh crore from the total market capitalisation of BSE-listed companies, which fell to around Rs 474.36 lakh crore from Rs 482 lakh crore at Friday's close.

Broader markets also came under pressure, with the Nifty Midcap 100 declining 1.63%. The Nifty PSU Bank index was among the worst-hit sectoral gauges, falling 3.24%, while the Nifty Financial Services index declined 1.69%. Nifty Metal, FMCG and Auto indices also fell nearly 1.7% each.

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Sunny Agrawal of SBI Capital said the market decline was largely driven by renewed uncertainty over the Iran-US situation and the impact of higher crude prices.

"I feel today's crack was predominantly led by statements by the US and Iran that Iran's proposal for the peace deal has been rejected by the US. Hence, there was scepticism about what will happen going forward," Agrawal said. "Again, it is the same old story - higher crude oil prices, higher interest rates and higher inflation."

Agrawal said the near-term market direction would remain sensitive to crude prices and developments around the Strait of Hormuz.

"In case crude oil prices sustain at a higher level, there is a probability that the markets may remain under pressure," he said.

A decline in crude prices following a resolution around Hormuz could, however, trigger a sharp rebound, he added.

Asian markets were also under pressure, with South Korea's Kospi falling 2.7%. Indonesian stocks lost 1.5%, Thailand shed 0.9%, and the mainland China Shenzhen gauge slumped more than 3%.

Yield on the US 10-year bond, the reference frame for most loan products across the planet, surged to 5.2%. Benchmark US yields are among the highest this millennium, and Wall Street has not recorded risk-free rates as high as those currently since the global financial crisis of 2007-08.

US 10-year yields have surged nearly 10% in a month, and remain on course for record highs not seen since the subprime crisis, despite the first increase in policy rates by the Federal Reserve earlier this month.

US equity futures declined, while European markets were mixed.

Chipmakers were among the major decliners in Asian markets.

The rise in crude prices has added to concerns for India, which relies heavily on imported energy. The Strait of Hormuz is a key route for global oil and gas shipments, and uncertainty over its reopening has kept energy markets volatile.

Provisionally, domestic institutional investors (DII) bought Rs 5,189 crore of stocks while foreign institutional investors (FII) sold Rs 5,353 crore of Indian equities, National Stock Exchange (NSE) data showed.