The BSE Sensex fell 744 points, or 0.91%, to 80,852, while the Nifty50 dropped 237 points, 0.96%, to trade at 24,575 around 10:30 am.
Shares of Reliance Industries led the losses, falling 1.5% to Rs 1,406 on the BSE. Among sectoral indices, Nifty Auto, FMCG, IT, Pharma, Consumer Durables, and Oil & Gas declined between 1% and 1.5%.
Nifty Bank and Financials also slipped up to 0.7%. In the broader market, the Nifty Midcap was down 0.5%, while the Nifty Smallcap edged 0.2% lower.
The total market capitalisation of all listed companies on the BSE fell by Rs 2.6 lakh crore to Rs 438.56 lakh crore.
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1) U.S. Treasury Yield Spike
Yields on longer-dated U.S. Treasuries hit their highest levels in 18 months. The yield on 30-year Treasury bonds remained above 5% after hitting a 1.5-year high in Asian trade. Rising yields tend to divert capital away from equities, especially in emerging markets like India.
2) U.S. Fiscal Concerns After Moody’s Downgrade
Investor sentiment has remained fragile since Moody’s downgraded the U.S. credit rating last Friday, citing concerns over the country’s rising debt burden. The downgrade has intensified global risk aversion, weighing on both Wall Street and Asian markets.
Markets are also closely watching the proposed tax bill, expected to be voted on this week, which could reportedly add $3.8 trillion to the U.S. debt, already at $36 trillion.
“The fundamental issue is the high fiscal deficit of the US, which the market feels is unsustainable,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
3) Weak U.S. Bond Demand
Investor reluctance toward U.S. assets was evident in Wednesday’s tepid demand for a $16 billion sale of 20-year bonds, pushing yields even higher.
“The weak US 20-year bond auction and the spike in yields of 5-year, 10-year and 30-year bonds indicate the declining confidence in US bonds,” Vijayakumar said.
That weighed on stocks in Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan 0.5% lower. Japan’s Nikkei was down 0.7% on the stronger yen. China’s benchmark index slipped 0.2%, while Hong Kong’s Hang Seng index declined 0.8% in early trading.
Overnight, the Dow fell 1.9%, S&P 500 dropped 1.6%, and Nasdaq slipped 1.4% after weak bond auction.
4) Technical Correction After Sharp Rally
Sameet Chavan, Head of Research (Technical and Derivative) at Angel One, said the recent sharp rally has pushed markets into overbought territory, with prices moving well above short-term moving averages. While the broader trend remains bullish, a phase of consolidation may continue in the near term. “A sustained move below the recent matching lows near 24,700 could trigger further profit booking, potentially dragging prices towards 24,600 and the 20-day EMA near 24,500,” he added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
