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Indian equity markets came under heavy selling pressure on Thursday, September 24, as a combination of rising US Treasury yields, elevated crude oil prices, renewed concerns over US interest rates and weakness in financial stocks triggered a broad-based sell-off.
The BSE Sensex plunged 1,247.71 points, or 1.67%, to close at 73,580.54, while the Nifty 50 declined 383.70 points, or 1.64%, to settle at 23,063.10. The sharp fall came after both benchmark indices had already been facing pressure from global uncertainty and foreign investor outflows.
The sell-off was not restricted to large-cap stocks. Mid-cap and small-cap indices also declined, indicating that the pressure was spread across a large part of the market.
Why Did the Stock Market Crash Today?
1. US Treasury yields hit multi-year highs
One of the biggest triggers for Thursday’s sell-off was the sharp rise in US government bond yields. The US 10-year Treasury yield moved above 5.10%, reaching its highest level since 2007, according to market reports. The two-year yield also climbed sharply.
Higher US bond yields can make dollar-denominated fixed-income investments more attractive relative to emerging-market equities. This can encourage investors to reduce exposure to riskier assets, including stocks in markets such as India.
The rise in yields was also linked to stronger-than-expected US business activity data, which increased expectations that the US Federal Reserve could keep interest rates higher for longer or potentially raise rates again.
2. Fresh concerns over US Fed rate hikes
Investor sentiment weakened further as expectations of another US Federal Reserve rate hike increased.
Market participants were reassessing the US interest-rate outlook after economic data indicated stronger business activity. Reports said futures markets were assigning a higher probability to a rate hike in October than earlier in the day.
Higher interest rates generally increase borrowing costs and can put pressure on equity valuations. For emerging markets, the effect can also be amplified when higher US yields encourage global investors to move money toward US assets.
3. Crude oil climbs above $102 a barrel
Another major concern for Indian investors was the renewed rise in crude oil prices. Brent crude moved back above $102 per barrel, with geopolitical developments involving the United States and Iran adding to uncertainty around future oil supplies.
India imports a large share of its crude oil requirement. Therefore, sustained high oil prices can increase the country’s import bill and create pressure on inflation, the current account and the rupee.
4. Financial and banking stocks take a hit
Financial stocks were among the biggest losers during Thursday’s session. Bajaj Finance, Axis Bank, Bajaj Finserv and other major financial companies faced significant selling pressure. The financial sector has a substantial weight in benchmark indices, meaning weakness in these stocks had a major impact on the Sensex and Nifty.
Insurance-related stocks also came under pressure following a consultation paper from the Insurance Regulatory and Development Authority of India (IRDAI) proposing changes involving commissions and expense limits. The proposals raised concerns among investors about the potential impact on the earnings of insurance and financial-services companies.
5. Rupee weakness and foreign outflows add pressure
The Indian rupee also weakened against the US dollar, trading around ₹95.87 per dollar during early trading. Rising crude prices and foreign selling have contributed to pressure on the currency.
Foreign portfolio investors have already been reducing their exposure to Indian equities. Data reported earlier this week showed that FPIs had withdrawn nearly ₹20,974 crore from Indian equities in September amid global economic and geopolitical uncertainties.
Broad-Based Market Sell-Off
The Thursday decline was not limited to the Sensex and Nifty. The Nifty Midcap 100 and Nifty Smallcap 100 also declined, while most sectoral indices remained under pressure.
The India VIX, a measure of expected market volatility, also jumped sharply during the session, reflecting increased investor uncertainty.
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What Should Investors Watch Next?
Markets are likely to remain sensitive to developments in US bond yields, Federal Reserve policy expectations, crude oil prices, geopolitical developments and foreign fund flows.
Investors will also track upcoming economic data and corporate developments for clues about the direction of the market. A sustained rise in crude prices or US yields could continue to influence sentiment, while easing global risks could reduce some of the current pressure.
For investors, Thursday’s sell-off highlights how closely Indian equities remain linked to global interest rates, commodity prices, currency movements and foreign capital flows. The one-day fall, however, does not by itself establish the longer-term direction of the market.
