Nifty, Sensex fall for sixth day on FII sell-off as oil price rises

NEW DELHI :Indian benchmark indices fell the most in six days on Thursday on continued selling by foreign institutional investors (FII) amid rising oil prices and US bond yields and weak Asian markets like Hang Seng and Nikkei 225 which plunged almost a per cent and a half each. Indian investors were left poorer by ₹2.98 trillion, with the NSE’s market cap falling to ₹314.26 trillion.

Underscoring the negative sentiment and possibility of an extended correction, fear gauge India Vix surged the most in six months. A steep rise in Vix signals bearishness, while a fall indicates optimism. The jump in Vix coincided with expiry of the September series of derivatives contracts.

The Nifty fell by 0.98% to 19,523.55 while the Sensex closed down nine-tenths of a per cent to 65,508.32 as FPIs sold a provisional ₹3,364.22 crore. Domestic institutions bought shares worth a provisional ₹2,711.48 crore. This enabled Nifty to recover from its intraday loss of 1.14% and close above the 19,500 mark.

The India Vix surged by 10.68% to 12.82 on fears of crude oil hitting $100 a barrel and the US benchmark 10 -year bond yield trading at a 16 -year peak of 4.65% leading to sustained FPI outflows from emerging markets like India. FPIs sold ₹14,768 crore this month through 27 September after buying shares worth ₹1.69 trillion in seven months.

“Creeping fears of crude testing 100/bbl mark and rising US bond yields on expect-ations of Fed remaining hawkish for longer have driven FPI outflows, and I suspect we could correct some more until Q2 result season gets underway from second week of Oct-ober,” said Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies.

While Brent crude surged 27% from $73 a barrel to $93 from 10 July to date, the US bond yield has risen 16% to 4.65% over the same period . Rising yields reduce the risk -free rate of return that US investors can earn from Emerging Markets like India and result in consequent outflows to the safety of the dollar.

“We can retest the lows of last month end of 19224 on Nifty and 64700 level on Sensex , thanks to the spectre of rising oil and US bond yields,” said Chandan Taparia , senior VP (technicals and derivatives) at Motilal Oswal Financial Research .

The levels mentioned by Taparia imply a further 1.2-1.5% immediate correction on the benchmarks. IT, consumer discretionary and autos led the losses on the benchmarks with Infosys, Wipro and TechM falling between

1.9% and 4.59%, Asian Paints by 3.97% and M&M by 2.1%. The Nifty rebalancing which takes effect from 29 September saw HDFC Bank being the top traded stock on NSE with volumes of ₹4225 crore , followed by ICICI Bank ( ₹2445 crore) and Reliance Industries ( ₹1707 crore).

Foreign brokerage Morgan Stanley said in a report on 3 September that Sensex or Nifty could rally by 10% each in a run up to the general elections in April-May 2024. The Nifty went on to post a record high of 20222.24 on 15 September from 19400 levels at the time of the report’s release . From there it has shed 3.45% through 28 September’s closing .

The Nifty Midcap 100 index underperformed the benchmark , falling by 1.3% to 40104 while the nifty Smallcap 100 outperformed correcting just two-fifths of a percent .