Indian equities suffered their sharpest sell-off in more than two months on Thursday as investors grappled with a triple whammy of rising US bond yields, rebounding crude oil prices and concerns over the impact of proposed insurance regulations on financial stocks.
The Sensex plunged 1,247.71 points, or 1.67%, to close at a three-month low of 73,580.54, while the Nifty slumped 383.70 points, or 1.64%, to 23,063.10, its lowest close in five months. It was the steepest single-day fall for both benchmarks since July 8, leaving Indian equities among the worst performers in Asia.
The intensity of the sell-off was reflected in the India VIX, which surged 22.76% to 12.70 as investors rushed to hedge against further volatility. The BSE Midcap and Smallcap indices fell 1.98% and 1.34%, respectively.
Global markets were already on shaky ground following a sharp sell-off in US equities and a spike in bond yields, with the US 10-year Treasury yield climbing above 5%. Adding to India’s worries, Brent crude rebounded to $106.5 a barrel, reviving inflation concerns for the oil-importing economy.
Domestic markets faced an additional headwind as banking, insurance and fintech stocks came under heavy selling pressure after the Insurance Regulatory and Development Authority of India (Irdai) proposed caps on commissions and tighter limits on management expenses.
PB Fintech bore the brunt of the selling, crashing 36%, while Turtlemint Fintech fell 20% and Max Financial Services dropped 9.81%. Overall, the BSE Bankex declined 1.88%.
“Markets came under pressure amid rising bond yields and a rebound in crude oil prices, reflecting heightened global macroeconomic risks. Investor sentiment turned increasingly risk-averse as concerns over the interest-rate trajectory intensified, driven by lingering uncertainties around inflation and economic growth,” said Vinod Nair, Head of Research, Geojit Investments.
On the domestic front, concerns over regulatory reviews of commission structures and their potential impact on profitability weighed on insurance and banking stocks, Nair added.
The sell-off was broad-based, with all sectoral indices ending in the red. Financial services, private banks, metals, automobiles and insurance were among the biggest casualties.
“While weak global cues kept the mood bearish through the trading session, other factors — such as the US 10-year bond yield climbing above 5%, a renewed uptick in global crude oil prices and a sharp fall in the rupee against the dollar — fuelled across-the-board selling,” said Ankur Punj, Managing Director, Equirus Wealth.
Uncertainty over the continuing West Asia conflict and persistent foreign portfolio investor selling were also keeping investors from making fresh equity bets, Punj added.
Foreign portfolio investors sold shares worth Rs 5,027.36 crore on Thursday, while domestic institutional investors provided some support with purchases of Rs 4,301.18 crore, according to provisional exchange data.
Market breadth was decisively negative, with 2,884 stocks declining on the BSE against 1,473 gainers.
The total market capitalisation of BSE-listed companies fell by Rs 2.65 lakh crore to Rs 480.90 lakh crore. The headline number, however, understated the day’s erosion as NSE’s listing added around Rs 4.5 lakh crore to BSE market capitalisation. Excluding this addition, investors effectively lost around Rs 7.15 lakh crore in market value during the session.
Among the 30 Sensex constituents, NTPC was the only stock to escape the sell-off, ending flat, while the remaining 29 closed lower. Bajaj Finance, Axis Bank, Bajaj Finserv, IndiGo and Trent were among the biggest losers.
Reliance Industries alone contributed 156.73 points, or about 12.6%, to the Sensex’s 1,248-point fall. The heavyweight declined 2.25%, adding significantly to the pressure on the benchmark.