Domestic equity benchmarks Sensex and Nfty 50 traded lower on Monday, Sept. 28, with investors remaining cautious after the benchmark indexes' longest weekly losing streak since 2020 as oil prices rose following a stalemate in US-Iran peace talks. US President Donald Trump said he had rejected an Iranian proposal to reopen the Strait of Hormuz and end fighting, while Iran insisted on Sunday that only diplomacy can solve its conflict with the United States and Israel.
Nifty 50 fell 0.33% to 23,064.9 in early trade, while the BSE Sensex shed 0.22% to 73,734.83. Fourteen of the 16 major sectors logged losses. The broader small-caps and mid-caps fell 0.2% each. Brent crude futures climbed 2% to about $106.5 per barrel, while Asian markets were down 0.2%. India, which is the world's third-largest crude importer, remains vulnerable to higher prices as they can stoke inflation, raise the country's import bill, and drag corporate margins.
By 12 noon, the Nifty 50 benchmark neared its six-month low level. BSE Sensex was trading 1.39% or 1,028 points lower at 72,868 levels. Sectorally, Nifty PSU Bank index was the top drag, down over 2.2%. It was followed by Private Bank, Financial Services, Realty and Auto indices. Barring TCS and Tech Mahindra, all shares were trading in the negative zone in the 30-share BSE Sensex index. Here are top three reasons why the market is falling today:
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Five Reasons Why Market Is Falling Today:
1.Brent Crude Oil Spike
Oil prices rebounded more than 1% on Monday after US President Donald Trump rejected a peace deal from Iran to resolve their conflict and reopen the Strait of Hormuz, keeping tensions in the Middle East elevated. Brent crude futures rose $1.32, or 1.27%, to $105.64 per barrel while US West Texas Intermediate crude was at $93.11 a barrel, up 70 cents, or 0.76%. Brent edged up 0.4% last week but WTI lost 7.9% on concerns that the US may ban diesel exports to ease record prices which could curb US refining output.
2.US Treasury Yields
Last week, the benchmark 10-year Treasury yield fell 0.37 basis points to 5.158%, after earlier reaching 5.2297%, the highest since 2007. The 30-year bond yield rose 2.63 basis points to 5.4883% and earlier reached 5.5319%, the highest since 2004. US Treasury yields have reached their highest levels since the financial crisis on persistent worries about higher inflation. Higher US Treasury yields can make dollar-denominated fixed-income investments relatively more attractive and increase global borrowing costs, potentially reducing foreign investment flows into emerging markets.
"Two apparently contradictory trends - in the economy and markets- deserve attention. The economy is resilient and corporate earnings are improving, but the market is steadily going down. This is a case of external headwinds overpowering domestic tailwinds. Brent crude at $106 and the US 10-year yield at 5.2% are strong headwinds that are weighing on markets,'' said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
3. Us-Iran Geopolitical Conflict
Trump rejected a peace deal from Iran to resolve their conflict and reopen the Strait of Hormuz, keeping tensions in the Middle East elevated. Iran announced a peace proposal last week at the UN General Assembly in New York, saying it had been transmitted to the Americans via Qatari mediators. Trump said on Saturday he rejected the plan, but told Axios in a phone interview on Sunday that he expected US negotiators to engage in more talks this week. Yemen's Saudi-led coalition said early on Saturday it had intercepted two ballistic missiles and two drones launched by the Iran-backed Houthis towards the kingdom.
4. FPI Outflows
FPIs, after turning buyers in July and August have again turned sellers in September. This scenario will keep the market under pressure in the near-term. On Friday, foreign institutional investors sold Rs 3,693.93 crore of Indian equities. ''From the market perspective an important trend is that even though FPIs are sellers in large-caps, they continue to buy mid-and small-caps despite their elevated valuations. The broader market is where the momentum is. This is likely to be a short-term phase,'' said Dr. V K Vijayakumar.
5.India VIX Jumps
The India VIX volatility benchmark has risen almost 40% in the last three sessions. On Monday, India VIX leaped 15%, indicating high volatality in the Indian stock markets. The rupee fell also 16 paise to 95.96. The uncertainty due to US-Iran geopolitical conflict played out on commdities as gold and silver futures fell by 2% each during the session.
Technical Bias
''From a technical perspective, the breach of Sensex 73,300 and Nifty 23,000 is significant and may result in further volatility if these levels are not reclaimed. Overall, higher crude prices, elevated bond yields, FII outflows, geopolitical uncertainty and the breakdown of key technical supports are currently weighing on Indian equities,'' said Sachin Gupta, VP - Research, Choice Broking. According to SBI Securities, if the Nifty 50 index slips below the level of 22,680, then the next support is placed in the zone of 22510- 22530 on the downside.
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