With Thursday’s fall, the Nifty has broken below the September 16 low of 23,116 from where it had reversed course and moved to this week’s high of 23,489, before giving up all of those gains in a single session.
Here are five reasons that led to the stock market fall on Thursday:
Bond Yields
US markets sold-off on Wednesday after the US 10-year bond yield surged to the highest level since July 2007, rising to as high as 5.13%. The longer tenor bond yield of the 30-year tenor is now nearing 5.4%, the highest level since 2004.
Higher bond yields in the US are negative for Emerging Markets like India as foreign capital exits EMs for better return prospects in the US.
Crude Oil
Earlier in the week, crude oil prices had cooled off to sub-$100 a barrel levels, which was an important reason behind the market recovery towards 23,500 levels.
Brent Crude is now nearing $106 a barrel again, after unverified reports quoted Iranian officials saying that the conflict with the US could expand further. CNBC-TV18 has not independently verified those reports.
However, oil prices had rebounded overnight after Iranian President Masoud Pezeshkian spoke at the United Nations and said that Iran will not surrender before the US threats, and although they remain open for talks, that will happen only once the US agrees to Iran’s conditions.
US Dollar
The US Dollar also continued to strengthen past the mark of 101, the highest level in two months. A stronger dollar is negative for our own currency and also for Metal stocks, which fell up to 3% on Thursday.
Banking Stocks
Banking and Insurance stocks were the biggest drags on the market on Thursday. The Nifty Bank fell over 1,000 points on Thursday after most banking stocks declined on the IRDAI draft paper on distribution norms.
The same draft paper triggered a sharp sell-off in insurance companies and distributors. Shares of PB Fintech fell 32%, while those of Turtlement were down 20%.
Shares of Axis Bank and IndusInd Bank also fell 5% each, while those of IDFC First Bank and AU Small Finance Bank were down a similar quantum as well.
The monthly expiry related volatility, coupled with some profit booking at higher levels also contributed to the market fall on Thursday.