D-Street sell-off deepens: Sensex, Nifty tumble; here's what's driving the fall

Indian equity benchmarks extended their decline for the fourth straight session on Thursday, weighed by sustained foreign institutional investor (FII) selling, elevated crude oil prices and rising bond yields.

The 30-share BSE Sensex pack slumped 570.59 points or 0.79 per cent to close at 71,909.70 on expiry day, while the NSE Nifty50 index declined 198.50 points or 0.88 per cent to end at 22,421.95. The indices remained highly volatile during the session, with Sensex recovering 616.82 points from its intraday low of 71,292.88, while Nifty rebounded 204.65 points from a low of 22,217.30.

The broader market also stayed under pressure, with Nifty Midcap 100 down 1.01 per cent and Nifty Smallcap 100 sliding 0.97 per cent. India VIX, a gauge of market volatility, jumped 7.32 per cent to 14.48.

The total market capitalisation (m-cap) of BSE-listed companies fell by around Rs 4.89 lakh crore to Rs 471.86 lakh crore from Rs 466.96 lakh crore in the previous session as equities declined sharply.

FII selling remain key overhang

Foreign investors remained net sellers for the fifth consecutive session, offloading equities worth more than Rs 10,148 crore on September 30. FIIs sold more than Rs 20,000 crore worth of equities in the final two sessions of September.

Domestic institutional investors (DIIs), meanwhile, continued to provide support, purchasing equities worth Rs 11,271 crore in Wednesday's session.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said, "With the US 10-year bond yield rising further to 5.3 per cent, FIIs may continue to sell. An apparent contradiction in the FII activity is that even while selling through the exchanges, they have been consistently investing through the primary market and also buying expensive mid-and small-caps."

Vijayakumar added, "While FIIs sold equity for Rs 45,536 crore through the exchanges in September, they invested Rs 9,676 crore through the primary market. The strength in the US bond yields and expectations of further weakness in the Indian large-caps might be the reason for this apparently inconsistent FII activity."

Ravi Singh, Chief Research Officer at Master Capital Services, said, "Indian equity markets remain under pressure, with the benchmarks heading towards their eighth consecutive weekly decline, amid persistent foreign investor selling, elevated global bond yields and ongoing West Asia tensions. Concerns over potential disruptions to energy supplies through the Strait of Hormuz have kept crude oil prices elevated, adding to inflation and margin pressures."

Singh also said, "FII selling is weighing on market liquidity, while pressure on the rupee has added to macroeconomic concerns. Elevated US Treasury yields continue to divert funds towards dollar-denominated assets."

Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, noted that unless yields cool alongside crude, India's recovery may remain concentrated rather than broad-based.

Crude oil tops $100

Brent crude prices also added to market pressure. Brent futures for December delivery climbed from $96.55 a barrel at 11:03 am to a high of $100.63 a barrel by 3:39 pm.

The rise in crude prices remains a key factor for investors as higher oil prices can have implications for India's import bill and inflation.

Rupee slips past 96 per dollar

The rupee also weakened past the 96-per-dollar mark. The currency touched a low of 96.29 against the US dollar at last check.

The rupee's decline came amid continued foreign fund outflows and elevated crude prices, which remained key factors in the market's Thursday sell-off.