Trading conditions in India's equity markets have entered a period without precedent in approximately 25 years. Both the Nifty 50 and the Sensex have now posted losses across eight straight weeks, a run of consecutive declines that stretches back roughly a quarter-century in terms of how long either index has sustained such a downward pattern.
Overseas investors offloading positions, persistently elevated American Treasury yields, climbing crude prices, a softening rupee, and unsettled conditions across global markets have each contributed to pushing the indices lower. For the truncated trading week ending 1 October, the Nifty index shed 3.11% to close at 22,421.95 points, while the Sensex posted a loss of 2.69%, settling at 71,909.70.
Over the course of eight consecutive weeks, the Nifty has shed more than 8.5% of its value. Measured against earlier downturns that dragged on for longer and cut deeper, the drop has stayed within a narrower range, though its duration has kept it in focus among market observers.
Selling pressure on Indian equities has drawn sustained contributions from overseas portfolio investors. Equity holdings worth roughly Rs 33,882 crore were offloaded by foreign portfolio investors over the course of that week, while domestic institutional counterparts absorbed approximately Rs 33,455 crore in Indian stocks. Local purchasing activity offered some offset against selling pressure, though the volume fell short of fully neutralising it. Throughout most of that month's trading sessions, overseas investors continued to record net outflows from the market.
Higher yields on US government bonds, by making dollar-denominated assets comparatively appealing to investors, can put pressure on portfolio flows into economies like India, prompting money to move back toward American markets. Data from bond markets placed the 10-year US Treasury yield at roughly 5.34%, a rate not seen since 2002. When Treasury yields climb, assets priced in dollars tend to draw greater investor interest, though the same dynamic pushes up the cost of borrowing across world markets. Shifts in the yield differential — whether in magnitude or direction — carry the potential to redirect foreign portfolio investment into or away from Indian equity markets.
Global supply concerns drove Brent crude past the $100-per-barrel mark once again. Elevated crude oil prices carry particular weight for India, given that the nation depends heavily on imported petroleum to meet its energy needs. Higher crude oil prices carry the potential to widen India's import expenditure, strain the trade balance, push down the value of the rupee, stoke inflation concerns, lift input costs across industries, and compress corporate profit margins.
On 1 October, the rupee slipped against the US dollar by half a percentage point, settling at Rs 96.315 — a rate not seen since two months prior. Three converging pressures — a climb in US Treasury yields, upward movement in oil prices, and a sustained withdrawal of foreign portfolio investment — weighed on the market.
RBI figures show that over the seven-day period ending 25 September, India's foreign exchange reserves contracted by $18.34 billion, bringing the total holdings down to $747.56 billion. Overseas currency holdings shed roughly $15.57 billion in value, with gold reserves posting a separate loss of around $2.59 billion. Tallied against the peak of $785.71 billion logged on 4 September, the foreign exchange stockpile had shed roughly $38.15 billion across the following three weeks.
Trading desks have pointed to central bank activity in currency markets as a factor behind the rupee's recent weakness, with the RBI's efforts to smooth out sharp exchange-rate swings drawing particular attention. Reserve figures published by the RBI are subject to fluctuations driven by shifts in the valuation of gold holdings and foreign-currency assets, and the institution does not break down the contribution of market-price movements versus direct intervention in its weekly disclosures.
Equity purchases by home-market institutions held steady even as overseas investors pulled their capital out. Overseas institutional investors offloaded roughly Rs 33,882 crore worth of holdings, while domestic funds absorbed close to Rs 33,455 crore across the same period. Local purchases fell short of what was needed to halt the run of losses across headline market indices.
Over the seven-day stretch, the BSE Midcap index shed 3.65% of its value, while its Smallcap counterpart gave back 2.64%. Losses were spread across consumer durables, public-sector banking, real estate, and metals, with all four categories posting declines. Shares in automotive companies retreated as worries over wholesale volumes weighed on the sector. Technology-linked shares held their ground through the session, with currency depreciation against the rupee offering a degree of relief to export-oriented companies.
Over the course of that week, the combined valuation of companies listed on the BSE slipped from roughly Rs 481.9 lakh crore down to Rs 467 lakh crore, leaving investors with a collective reduction in paper wealth of close to Rs 15 lakh crore. Tallied across the full span of eight consecutive weekly declines, one assessment placed the total drawdown in investor wealth at approximately Rs 28.29 lakh crore.
Trading attention over the coming weeks is expected to be influenced by several factors, among them shifts in US Treasury yields, swings in crude oil prices, the pace of foreign investor activity, rupee volatility, quarterly corporate earnings, and any rate decisions handed down by the RBI. Longer-term records of market downturns show that prior stretches of consecutive losses have, on a number of occasions, carried steeper percentage drops than the present pullback has registered. What analysts have identified as distinctive about this episode is the convergence of worldwide pressures on Indian assets arriving simultaneously, compounded by the duration of the turbulence.
