Sensex falls 778 points as Brent tops $107 and US yields clear 5%
The market opened higher on technology stocks and gave it all back. IT was the only major sector to finish up; realty, metal and PSU banks led a broad decline.
Indian equities opened higher on Tuesday and closed sharply lower, with the Sensex down 777.94 points, or 1.04%, at 74,003.82 and the Nifty down 279.50 points, or 1.19%, at 23,118.60.
The reversal was almost total. The Nifty opened at 23,576.15 and touched 23,592.85 before selling took hold.
What turned it
Two numbers outside India did most of the work.
Brent crude traded at $107.65 a barrel, up 1.86%, with US crude at $103.74, up 2.32%. The US ten-year Treasury yield crossed 5%, its highest in roughly three years, pushed there by persistent inflation and the growth of federal debt.
The rupee was weakening towards 96 to the dollar. Vipin Dixena, quoted below, described crude above $107 as a macro headwind for India.
A 25 basis point increase at the Federal Reserve's coming meeting is largely priced in, and investors were positioning for it.
The split inside the market
The session divided cleanly between exporters and everyone else.
Technology finished as the only major sector in the green, with the Nifty IT index up 2.19%. HCL Technologies rose 3.95%, Infosys 3.79%, TCS 2.28%, Tech Mahindra 2.26% and Wipro 1.55%.
The declines were broad. Realty fell 4.04%, metals 2.54%, consumer durables 2.41%, PSU banks 2.29% and autos 2.01%.
Among individual stocks, Bharat Electronics lost 5.30%, Shriram Finance 4.74%, Adani Enterprises 4.29%, IndiGo 3.96% and Grasim Industries 3.38%. Banking and energy names were among the heaviest drags on the indices, including ICICI Bank, Reliance Industries, State Bank of India, Larsen & Toubro and Bajaj Finance.
What analysts said
Vipin Dixena put the oil price at the centre of the problem for India. "Crude oil remaining above $107 a barrel is becoming a serious macro headwind for India," he said.
Riyank Arora of Hedged.in read the move as a pause rather than a turn, saying the pullback "reads more like a pause than a reversal, so long as support levels aren't breached". He identified support at 23,050 to 23,000, a firmer zone at 22,850, and resistance between 23,200 and 23,300.
Prithviraj Kothari of RiddiSiddhi Bullions put the odds of a Federal Reserve rate increase at roughly 90%, and noted that geopolitical risk remained elevated, with Houthi attacks and tension in the Strait of Hormuz keeping Brent close to $100.
The regional picture
Asian markets were mixed rather than uniformly weak. Japan's Nikkei rose 0.22%. Singapore fell 1.39%, Hong Kong 1.25%, South Korea 0.86%, Taiwan 0.77% and Shanghai 0.54%.
India's decline was steeper than most of its neighbours' on the day.
Where the oil price comes from
The crude move is not a market story on its own. Saudi Arabia's East-West pipeline, which carries crude to the Red Sea without using the Strait of Hormuz, remains offline after drone strikes. Houthi forces have taken control of the Bab el-Mandeb strait. A supertanker is burning in Hormuz, and a meeting in Oman that was to agree temporary routes through the strait was postponed indefinitely.
Each of those removes an alternative to a chokepoint that is already restricted. Until one of them is reversed, the input that drove Tuesday's session is unlikely to change direction on its own.
Sources
- ANI via The Tribune — ANI. Closing levels and moves; Nifty open and high; Brent $107.65 and US crude $103.74; rupee near 96; sector and stock movers; Dixena, Arora and Kothari quoted; Asian market closes.
- LatestLY — Own reporting. US 10-year yield above 5%, a three-year high; 25bp Fed hike largely priced in; banking and energy leading losses with ICICI, Reliance, SBI, L&T and Bajaj Finance named; Saudi pipeline offline.
