Indian benchmark indices began the Monday trading session with subdued sentiment, continuing their decline after the longest weekly losing streak since 2020. The dip in investor sentiment was driven by rising crude oil prices and increasing global bond yields following President Donald Trump's rejection of Iran's latest proposal.
The BSE Sensex barometer fell by 900 points, representing 1.21 percent, reaching 72,995. Concurrently, the NSE Nifty 50 benchmark index lost 284 points or 1.22 percent, dropping to 22,856. Negative momentum was observed across all sectoral indices at the start of trading. Broader markets also faced significant selling pressure, as small and mid-cap indices declined by 1 percent each.
Dr. V. K. Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that 'Brent crude oil price at $106 and the 10-year US Treasury yield at 5.2 percent are serious headwinds putting pressure on markets. Institutional Portfolio Investors (FPIs), who were buying in July and August, have once again become sellers in September. This scenario is likely to sustain market pressure in the near term.'
Several factors contributed to the decline in the Indian stock market. Firstly, concerns over the Middle East conflict. US President Donald Trump rejected Iran's proposal to resume operations in the Strait of Hormuz and cease hostilities, while Iran insisted that only diplomacy could resolve the conflict with the US and Israel. This impacted global equity, oil, and bond markets.
Most Asian markets traded in the red: South Korea fell by 2 percent, and Japan's Nikkei dropped by 0.10 percent. Chinese markets also showed declines of more than 1 percent.
Secondly, the rise in oil prices by 2 percent. Concerns over supply issues amid the lack of resolution to the Middle East crisis supported high oil prices. The higher cost of crude oil threatens to increase inflation and the current account deficit for India, which remains the world's third-largest oil importer. Brent crude futures rose by 2.2 percent to $106.6 per barrel, and US WTI crude jumped by 1.45 percent to $93.76 per barrel.
Thirdly, the jump in bond yields. Selling resumed in bond markets amid rising oil prices and heightened inflation fears. According to a Bloomberg report, the yield on two-year US interest-rate sensitive bonds rose by five basis points to 4.90 percent, and the ten-year yield climbed by four basis points to 5.20 percent. Higher rates reduce the attractiveness of riskier emerging markets like India.
The fourth factor is the resumption of selling by FPIs. After being net buyers in July and August, foreign portfolio investors turned sellers this month, offloading shares worth 17,131 crore rupees, leading to a total year-to-date sales volume of 2.41 trillion rupees, according to NSDL data.
Vijayakumar added that 'from a market perspective, an important trend is that even though FPIs are selling large-cap stocks, they continue to buy mid and small-cap stocks despite their elevated valuations. Momentum is present in the broader market. This is likely to be a short-term phase.'
The technical outlook, according to Osho Krishnan, Chief Manager of Technical Research and Derivatives at Angel One, remains extremely weak, as the weekly RSI offers limited support, and the overall macroeconomic backdrop continues to reinforce bearish sentiment. He warned that 'the level of 23,000 remains a key support and a critical level that bulls must defend. A decisive break below this level could accelerate the decline towards the 22,800–22,700 zone in the medium term.' Furthermore, Krishnan noted that a bearish breakout around 23,280–23,350 is expected to serve as an immediate hurdle and may limit any attempts at recovery.
