Indian shares suffered a broad sell-off as surging oil prices, a weaker rupee, tighter monetary policy and record foreign investor withdrawals intensified pressure on the market.
Indian shares fell sharply on Thursday, dragging the Sensex to its weakest close in 32 months as investors continued to fret over inflation, currency pressure and the prospect of higher borrowing costs. According to Reuters, the blue-chip index ended at 71,593.24, down 1.44 per cent, while the Nifty 50 slipped 1.64 per cent to 22,231.8, its lowest finish in 18 months.
The decline came against a backdrop of rising crude prices, firmer global bond yields and a softer rupee, a combination that has kept local markets under strain for weeks. The Reserve Bank of India compounded that anxiety on Wednesday by lifting its repo rate by 25 basis points to 5.5 per cent and signalling that more tightening may follow as it tries to contain inflation.
Foreign investors have been adding to the pressure by continuing to pull money out of Indian equities. Reuters reported that overseas funds sold a net 469.9 billion rupees in the previous nine sessions, taking year-to-date outflows to a record $30.4 billion. That sustained selling has left Indian shares lagging badly this year, even as some emerging markets have benefited from flows into artificial intelligence-related stocks.
The weakness was broad-based. All 16 major sectors finished lower, while small-cap and mid-cap stocks fell 2.3 per cent and 2.5 per cent respectively. Among the biggest benchmark stocks, HDFC Bank lost 1.5 per cent, ICICI Bank fell 0.6 per cent and Reliance Industries dropped 2.5 per cent. Market participants said the falls reflected a familiar mix of higher oil costs, a weaker currency and investor concern that tighter policy could weigh further on growth.
Oil remains at the centre of the nervousness. Brent crude jumped about 4 per cent to above $104 a barrel as attacks on shipping in the Gulf and a hurricane in the United States heightened supply worries, Reuters said. That backdrop has also fed into pressure on rate-sensitive sectors and on companies with higher exposure to imported inputs, while analysts have warned that the market may remain vulnerable until energy prices, bond yields and foreign outflows stabilise.
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