- Indian equities fell as foreign selling, high US yields, and a weak rupee hit sentiment
- Nifty dropped over 200 points intraday, Sensex fell 1.14% by early afternoon trading
- Foreign investors sold Rs 10,148 crore on September 30, largest outflow in six months
Indian equities extended their losses on Thursday, with the Nifty 50 and Sensex falling as persistent foreign selling, elevated US Treasury yields and a weak rupee weighed on sentiment. G Chokkalingam, Founder and Head of Research at Equinomics Research, said liquidity constraints are the “major reason” for the current weakness.
Nifty has plunged over 200 points from day's high, falling as much as 1.22% intrady to 22,344. Sensex meanwhile has fallen 1.14%, or over 950 points intraday, to 71,651, as of 12:55 pm.
Barring IT, all sectoral indices are in the red, with Auto and Media leading the losses, trading 4% and 3.43% lower respectively. Nifty Bank is down 3000 points in the last 30 days.
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Here are three reasons why market is crashing:
FPI Selling
Foreign investor selling has emerged as one of the biggest drags on Indian equities. FPIs sold Rs 10,148 crore of Indian equities on September 30, their biggest single-day outflow in nearly six months.
Foreign investors sold Rs 10,148 crore on September 30, taking monthly outflows to Rs 51,999 crore. Domestic institutions bought Rs 11,272 crore on September 30, taking September inflows to Rs 80,619 crore.
IPOs Are Pulling Liquidity From The Secondary Market
Domestic liquidity is also facing pressure from the heavy primary-market activity. Chokkalingam also argues that IPOs have absorbed funds from domestic retail investors.
"FPIs are also selling as oil prices remain firm and the rupee is quite weak," he said, adding that the secondary market could remain weak in the short term unless crude prices fall significantly or the IPO boom loses momentum.
Oil, Rupee And US Yields Create A Tough Mix
Higher global borrowing costs are adding another layer of pressure. The US 10-year Treasury yield has moved to 5.33%, its highest level since 2002.
Brent was around $99 a barrel on Thursday after reclaiming $2 in the last 15 minutes. For India, elevated oil prices raise concerns around inflation, the import bill and corporate margins.
The rupee also slipped to around 95.99 per dollar on Thursday as the dollar strengthened alongside higher US Treasury yields.
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