Indian blue-chips fell on Tuesday, hit by the broader Asian weakness and a drop in IT stocks and were set for their worst month this year due to high U.S. interest rates and oil prices, the Middle East conflict and persistent foreign investors sales.
The NSE Nifty 50 was down 0.25% at 19,092.30 as of 12:19 p.m. IST, while the S&P BSE Sensex fell 0.27% to 63,940.25. They have lost nearly 2.75% in October, the most in any month in 2023.
The concerns around the Middle East conflict have also led to a spike in oil prices, a negative for net importers like India.
ADVERTISEMENT
More tellingly, the U.S. Federal Reserve’s rhetoric of higher-for-longer rates has helped send U.S. Treasury yields to multi-year highs, making them more attractive for investors.
As a result, foreign investors have offloaded 228.50 billion rupees ($2.74 billion) worth of Indian shares so far in October, the most for any month since January.
The Fed is widely expected to hold rates at its policy decision after the bell on Wednesday. But Chair Jerome Powell’s commentary will be key.
Any indication of rates remaining high for a prolonged period will weigh on IT stocks, which have already warned of weak spending by their U.S. and European clients. The IT index lost 0.6% on the day.
ADVERTISEMENT
“Domestic market is factoring prolonged high interest rates in the U.S., with the recent macroeconomic data providing no reasons for any change in Fed’s hawkish policy stance,” said Pramod Gubbi, founder of Marcellus Investment Managers.
“The persistent foreign selling in Indian shares due to higher U.S. yields will also trigger consolidation.”
Also weighing on sentiment was a drop in Asian markets after the Bank of Japan the Bank of Japan tweaked its bond yield control policy.
ADVERTISEMENT
Among stocks, SBI Life rose 2.35%, the most on the Nifty, continuing its post-earnings rally.