Key Takeaways
- India's Nifty 50 index closed 1.19% lower at 23,118.6, its lowest level in five months.
- Elevated oil prices and rising bond yields contributed to the market's decline.
- IT and HDFC Bank stocks provided some support, rising 2.2% and 1.2% respectively.
Indian shares fell sharply on Tuesday, with the benchmark Nifty 50 closing 1.19% lower at 23,118.6, its lowest close in five months. The broader BSE Sensex also declined, shedding 1.04% to 74,003.82.
The market opened with a slight upward trend but quickly reversed, with the 50-stock index falling as much as 2.2% during the closing auction session. This followed a 4.8% decline over the previous five weeks.
Arun Malhotra, a fund manager at CapGrow Capital, attributed the market's weakness to 'elevated oil prices, surging treasury yields, and the upcoming big IPOs.' He added that if the U.S. Federal Reserve hikes rates, India would likely follow suit to protect its currency.
The decline was widespread, with 15 of the 16 major sectors falling. The broader small-caps and mid-caps also experienced significant losses, dropping 2.4% and 2.1% respectively.
Brent crude futures surged by 2%, reaching $107.8 per barrel, as Middle East tensions escalated. Yemen's Iran-aligned Houthis launched new attacks on Saudi Arabia, and there were reports of increased activity along the western coast of Yemen.
Bond yields, particularly the 10-year U.S. Treasury yield, hit a nearly two-decade high, adding to the market's concerns. The Federal Reserve is expected to raise interest rates this week due to rising inflationary pressures.
Despite the overall decline, IT stocks showed some resilience, rising 2.2%. This was driven by calls for a slowdown in AI development, which threatened the business models of India's largest software services companies. Tata Consultancy Services and Infosys saw their shares rise 2.3% and 3.8% respectively.
HDFC Bank, the country's largest private lender, also contributed positively to the market, rising 1.2% after it submitted names of two CEO candidates to the central bank for approval.
Elevated oil prices, surging treasury yields and line-up on big IPOs explains much of the current market weakness.
Arun Malhotra, Fund Manager at CapGrow Capital
