Indian equities extended their losses on Thursday, with the Nifty 50 and Sensex falling to three-month lows as a global bond selloff, rising US Treasury yields and higher crude oil prices weighed on sentiment.
The Nifty 50 fell 386.35 points, or 1.65%, to 23,060.45, while the Sensex dropped 1,219.95 points, or 1.63%, to 73,608.30. Both benchmarks are now at their lowest levels in three months.
The decline came as global markets faced pressure from rising borrowing costs. The US 30-year Treasury yield rose to its highest level since 2004, while Brent crude gained 3% to $106.14 a barrel. A stronger dollar and renewed uncertainty around the US-Iran conflict have added to pressure on emerging-market assets.
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Three factors are driving the selloff: the sharp rise in US Treasury yields, higher crude prices and broader risk aversion amid geopolitical and trade uncertainty.
Treasury Yields
A global selloff in government bonds intensified after stronger-than-expected US economic data and weak demand at a US Treasury auction pushed yields higher.
The US 10-year Treasury yield rose more than 13 basis points to 5.104% and reached its highest level since July 2007. It had risen 15 basis points on Wednesday, marking its biggest one-day increase since the market turmoil triggered by US President Donald Trump's April 2025 tariff announcement.
The five-year Treasury yield also moved above 5% for the first time since 2007 after weak demand at an auction of $70 billion of five-year notes.
The 30-year Treasury yield rose to its highest level since 2004. It gained more than nine basis points to 5.398% on Wednesday, reaching its highest level since June 2007.
"The sell-off was driven by rebounding oil prices, stronger-than-expected US PMI data, and weak demand at a US$70 billion 5-year Treasury auction, which pushed 5-year yields above 5%," UOB said in a note.
The rise in US yields spread to other bond markets, with Japanese, Australian and New Zealand government bonds also coming under pressure.
Oil Prices
Brent crude rose 3% to $106.14 a barrel, adding to concerns over inflation and the outlook for interest rates.
Higher energy prices are putting pressure on a bond market already facing concerns over weak auction demand and the possibility that interest rates could remain elevated for longer.
The prospect of higher energy costs alongside a still-strong US economy has increased pressure on global government bonds. The average yield on global government debt moved close to 4%.
Stocks have seen little relief from movements in oil prices as investors also assess the broader impact of higher energy costs on inflation and monetary policy.
Global Risk
The rise in Treasury yields has been accompanied by a stronger dollar, adding pressure on emerging-market assets.
A Bloomberg gauge of the dollar hovered around levels last seen in July as traders increased their expectations of further Federal Reserve rate hikes.
The selloff on Wall Street also spread to Asia-Pacific markets, with stocks and bonds coming under pressure across the region.
Renewed uncertainty around the US-Iran conflict has added to risk aversion, while investors are also watching the scheduled meeting between US President Donald Trump and Chinese President Xi Jinping for developments on trade and technology.
Expectations of another US Federal Reserve rate increase have also risen after stronger-than-expected US economic activity data and comments from Federal Reserve Governor Michael Barr.
"In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion," Barr said.
He added that the Federal Reserve wanted to support "sustainable, durable growth" and maximum employment, while maintaining price stability.
Markets increased their bets on another quarter-point Fed rate increase in October after Barr's comments. The odds rose to 66.4% on Wednesday from 55% a day earlier, according to the CME Group's FedWatch tool. The probability was below 10% a month ago.
The combination of higher US Treasury yields, rising crude prices, a stronger dollar and expectations of further rate increases has intensified pressure on Indian equities, pushing the Nifty 50 and Sensex to three-month lows on Thursday.
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