Daijiworld Media Network - Mumbai
Mumbai, Sep 28: Indian equity markets came under heavy selling pressure in morning trade on Monday, with the benchmark Sensex plunging more than 1,000 points and the Nifty50 falling below 22,850 amid elevated crude oil prices, rising US bond yields and escalating tensions between Iran and the US.
At 10.40 am, the Nifty50 was trading at 22,835.15, down 305 points or 1.32 per cent, while the BSE Sensex stood at 72,909.34, lower by 986 points or 1.33 per cent.
The sell-off wiped out nearly Rs 6 lakh crore from the combined market capitalisation of BSE-listed companies, which fell to around Rs 476 lakh crore.
All 30 Sensex constituents were trading in the red, with Bajaj Finance, Kotak Mahindra Bank and HDFC Bank among the major laggards.
The weakness also extended beyond large-cap stocks, with the Nifty Smallcap 100 and Nifty Midcap 100 indices declining more than 1 per cent each.
Indian equities were also tracking losses across several Asian markets amid the surge in oil prices. South Korea's Kospi fell more than 2 per cent, while China's Shanghai Composite declined over 1.7 per cent. Japan's Nikkei, however, recorded modest gains.
**Iran-US tensions escalate**
Market sentiment remained under pressure as tensions between Iran and the US intensified after US President Donald Trump rejected Iran's proposal for a seven-day ceasefire along with the reopening of the Strait of Hormuz.
Speaking to reporters on Saturday, Trump said, "I reject this agreement. They want an agreement to be made under which the Strait of Hormuz is immediately opened, because they are severely failing."
Iranian President Masoud Pezeshkian, meanwhile, said the country would remain firm and would not back down in the face of the US and Israel.
**Crude prices rise**
The latest developments in the Middle East triggered another sharp rise in crude oil prices, with oil gaining around 2 per cent and moving close to $107 a barrel as markets factored in the possibility of further disruptions to shipments.
JPMorgan said it could no longer clearly assess the direction of oil prices and, for the first time since the Iran war began in February, said it did not have a defined baseline scenario for the market.
**US bond yields climb**
US Treasury yields continued to rise, adding further pressure on equities. The benchmark 10-year US Treasury yield moved above 5.2 per cent, its highest level since 2004.
The 30-year US bond yield also crossed 5.5 per cent, while the two-year Treasury yield, which is closely linked to expectations of Federal Reserve interest-rate moves, rose above 4.9 per cent.
Higher bond yields can make debt-market investments more attractive relative to equities, potentially increasing pressure on risk assets.
**Rupee weakens**
The Indian rupee also came under pressure, weakening 14 paise to 95.89 against the US dollar in early trade.
Forex traders remained concerned about the rupee breaching the psychologically important 96-per-dollar level, with elevated crude prices, higher US Treasury yields and a stronger dollar weighing on the currency.
"Volatility in crude and gold, along with a rise in the dollar, limited the rupee's ability to sustain gains. Going ahead, currency movement is likely to remain range-bound amid global commodity and dollar volatility. Rupee range can be seen between 95.50-96.50," said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.
**FII selling continues**
Foreign investors continued to sell Indian equities, offloading shares worth a net Rs 3,694 crore on Friday, according to provisional NSE data.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said the shift in foreign portfolio investor (FPI) flows towards the negative side, after positive inflows in July and August, had become visible earlier this month.
He said the selling trend had continued, with total equity outflows through exchanges reaching Rs 25,682 crore so far in September.