Indian shares extend losing run on elevated oil, bond yields

Indian share benchmarks extended their losing run on Tuesday as the absence of a Middle East peace deal drove up oil prices and bond yields, stoking concerns about foreign investor outflows from the local market.

The Nifty 50 lost 0.28% to 22,716.2 and BSE Sensex fell 0.33% to 72,529.07. The indicative closing level of the 50-stock index briefly slumped 2.5% during the closing auction session, amid volatility due to monthly expiry of derivatives contracts.

The benchmark indexes have shed close to 2% so far in a holiday-shortened week, on top of a nearly 6% drop in the last seven weeks, one of their longest losing streaks on record.

Brent crude futures hovered around $105 a barrel, while the benchmark 10-year US Treasury yield spiked to a 19-year high above 5.27%.

“Rising US Treasury yields have raised the risk-free return available to global investors, making the (premium) on offer in Indian equities relatively less compelling. This is prompting some foreign portfolio investors to shift capital out of India,” said Nitesh Arora, managing partner at Equirus Family Office.

Foreign institutional investors sold Indian shares worth 53.53 billion rupees (about $558 million) on Monday, a four-week high. They have sold a net of $2.17 billion worth of shares in September so far, after two consecutive months of buying driven by the central bank’s measures to shore up dollar flows into the economy.

The benchmark Nifty 50 index is down 5.7% so far in September, while MSCI’s broadest index for Asia Pacific stocks outside Japan is down about 1%.

India’s under performance is primarily driven by its higher reliance on imported oil. Higher prices threaten to stoke inflation, widen the import bill and squeeze growth and corporate margins for world’s third-largest crude importer.

Thirteen of the 16 major sectors logged losses on Tuesday. The broader small-caps and mid-caps dropped 0.8% and 1%.

Heavyweight banks fell 0.4% and IT lost 1.5%.

Most listed Tata group companies declined on the day, with Tata Chemicals dropping 4.5% and Tata Investment losing 2.9%, on dimming prospects of Tata Sons’ listing.