The BSE Sensex dropped 644 points, or 0.79%, to close at 80,952, while the NSE Nifty declined 204 points, or 0.82%, to end at 24,609. During the session, Sensex slid over 1,100 points, and Nifty dipped below 24,500.
Among sectoral indices, Nifty Auto, FMCG, IT, Consumer Durables, and Oil & Gas declined between 1% and 1.5%. Nifty Bank and Financials also slipped up to 0.5%. In the broader market, the Nifty Midcap was down 0.5%, while the Nifty Smallcap edged 0.26% lower.
The total market capitalisation of all listed companies on the BSE fell by Rs 1.86 lakh crore to Rs 439.32 lakh crore.
Here are four major factors behind today’s stock market decline:
1) U.S. Treasury Yield Spike
Yields on longer-dated U.S. Treasuries hit their highest levels in 18 months. The yield on 30-year Treasury bonds remained above 5% after hitting a 1.5-year high in Asian trade. Rising yields tend to divert capital away from equities, especially in emerging markets like India.
2) U.S. Fiscal Concerns After Moody’s Downgrade
Investor sentiment has remained fragile since Moody’s downgraded the U.S. credit rating last Friday, citing concerns over the country’s rising debt burden. The downgrade has intensified global risk aversion, weighing on both Wall Street and Asian markets.
Markets are also closely watching the proposed tax bill, expected to be voted on this week, which could reportedly add $3.8 trillion to the U.S. debt, already at $36 trillion.
“The fundamental issue is the high fiscal deficit of the US, which the market feels is unsustainable,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
3) Weak U.S. Bond Demand
Investor reluctance toward U.S. assets was evident in Wednesday’s tepid demand for a $16 billion sale of 20-year bonds, pushing yields even higher.
“The weak US 20-year bond auction and the spike in yields of 5-year, 10-year and 30-year bonds indicate the declining confidence in US bonds,” Vijayakumar said.
That weighed on stocks in Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan ended 0.6% lower. Japan’s Nikkei was down 0.92% on the stronger yen. China’s benchmark index slipped 0.2%, while Hong Kong’s Hang Seng index declined 1.2%.
Overnight, the Dow fell 1.9%, S&P 500 dropped 1.6%, and Nasdaq slipped 1.4% after weak bond auction.
4) Technical Correction After Sharp Rally
According to Rupak De, Senior Technical Analyst at LKP Securities, the Nifty slipped amid global weakness triggered by fresh U.S. tax bill discussions. Technically, the index faced resistance at the 200-hour moving average and found support near the 21-day EMA at 24,445. As long as the Nifty remains below 24,800, the short-term trend is expected to stay weak, with any upward move likely to face selling pressure. A break below 24,445 could accelerate downside, while a move above 24,650 may open the door to 24,775–24,800.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
