Indian Stock Market Slips: Sensex, Nifty Drop on US Bond Yields, Rising Crude Prices

The Indian stock market slipped into the red on Monday, with benchmark indices Sensex and Nifty falling as investors grappled with rising US bond yields and renewed expectations of higher interest rates following hawkish comments from US Fed Chair Kevin Warsh. Renewed US-Iran tensions and a surge in crude oil prices above $90 a barrel added to the pressure.

Sensex dropped over 500 points to slip below 76,800 while Nifty 50 lost over 150 points to test 24,000 level. Broader markets saw a sharper fall, with Nifty Smallcap 100 and Nifty Midcap 100 indices dropping up to 0.8%.

Infosys, NTPC, Tata Steel and IndiGo shares dropped around 2% each to lead losses on Sensex, while Power Grid, Asian Paints, HCL Tech, Adani Ports, L&T, UltraTech Cement and TCS fell more than 1% each. Bucking the trend, HDFC Bank shares jumped around 2% while Eternal shares were up over 1%.

Among the sectors, Nifty Metal dropped around 2% while Nifty PSU Bank and Nifty IT were down over 1% each. The overall market favoured the bears, with NSE seeing 1,841 declines against 966 advances, while 148 stocks remained unchanged.

This week’s trading begins with the market facing a few headwinds, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. From the global equity market perspective, the sentiments have turned slightly negative following the Fed chief Kevin Warsh’s statement that if inflation persists at rates higher than the Fed’s long-term target, “we have work to do”. The market has taken this as an indication of a rate hike in the FOMC meeting scheduled for September 15-16, the analyst noted. The consequent rise in bond yields is negative for equity markets, he said.

Another headwind is the renewed escalation of tensions between the US and Iran pushing the Brent crude above $90.

What lies ahead for Dalal Street?

Even if the Nifty comes under pressure, lots of action are likely in the broader market which is attracting big buying in recent weeks, according to Vijayakumar.

He noted that a significant recent trend in the market is that the market is giving more preference to growth than value.

Technical view on Nifty

Friday’s inside bar retains hopes for Nifty’s upswing from the vicinity of 24,060, which would also be consistent with the consolidation band that has been in play for the last eight days, said Anand James, Chief Market Strategist, Geojit Investments.

But as on Friday, James would wait for a break above 24,215 to signal strength. Alternatively, inability to float above 24,060 would expose 23,575, he added.