Indian stock markets showed signs of recovery on Friday, with the SENSEX closing at 76,515.43 and NIFTY50 ending at 23,897.70, both recovering marginally after a four-day losing streak. As per The Financial Express, the recovery offered little relief, with valuations, IPO supply and shifting rate expectations keeping investors cautious for the week ahead. Domestic equities ended the week about 1% lower, as elevated global bond yields and expectations of tighter US monetary policy weighed on investor sentiment and foreign flows. The 10-year US Treasury yield rose above 4.8% this week amid expectations of higher US inflation and a rate hike at this month's Federal Open Market Committee meeting, triggering heavy foreign selling in the first half of the week. Elevated crude prices, around $95 per barrel, and continued tensions in West Asia added to the pressure. Markets recovered on Friday after Fed governor Christopher Waller indicated he would support keeping interest rates unchanged at the next policy meeting, but the initial optimism faded as the Nifty succumbed to profit booking near the 24,000 mark, reflecting shaky investor confidence.
The sharp rise in US 10-year Treasury yields to 4.757% is creating significant challenges for Indian investors as higher US borrowing costs are affecting equities, bonds, the rupee and the Reserve Bank of India's interest-rate decisions. As per Reuters, the selloff in US government bonds has pushed up borrowing costs across the economy, making US Treasuries more attractive compared with emerging-market assets such as Indian equities and bonds. For India, the key concern is the flow of global capital, as US Treasuries are viewed as a benchmark for global borrowing costs and considered relatively safe dollar-denominated assets. This can encourage foreign portfolio investors to move money towards US debt, putting pressure on the Nifty and Sensex. Higher yields can also weigh on equity valuations because the present value of future corporate earnings becomes less attractive, particularly for high-growth stocks. The rupee is another transmission channel, as stronger demand for dollar assets can put pressure on the Indian currency, while a weaker rupee makes imports such as crude oil more expensive.
Consumer-focused sectors bore the brunt of selling pressure this week, with automobiles, consumer durables and consumer discretionary being the top losers. As per The Financial Express, auto stocks bore the brunt of the selling as valuations across the sector seem to have moved ahead of fundamentals after a strong period of growth. Auto stocks were particularly affected, with the NSE auto index plunging more than 3% after August sales numbers from several automobile companies failed to meet market expectations. Realty stocks were also under pressure, with the Nifty Realty index falling around 2%. The weakness in discretionary and consumer durables was also driven by profit booking amid valuation concerns, with these sectors having already enjoyed strong rallies, leaving room for disappointment. Oil & gas and realty emerged as the top gainers, albeit with modest gains of 0.8% and 0.2%, respectively. Coal India led Nifty gainers with a 3.14% rise to ₹414.20, reflecting the sharp rise in global crude prices, while ONGC added 0.34% to ₹237.25, Sun Pharma edged up 0.20% to ₹1,932.80, L&T gained a marginal 0.03% to ₹3,981.40, and Adani Ports rose 0.02% to ₹1,647.80.
Brent crude prices moved towards $96 a barrel after rising more than 6% this week to $95 a barrel, extending the previous session's surge amid intensifying West Asia tensions. As per The Financial Express, oil has suddenly become a major concern for Indian investors, with India imports around 85-90% of its crude oil requirements. A sustained rise in oil prices can therefore increase the country's import bill and put pressure on inflation, the fiscal position and the rupee. The Strait of Hormuz is at the centre of the concern, as the route handles around one-fifth of global energy supplies. US West Texas Intermediate crude climbed 0.9% to $91.02 on Wednesday, while the U.S. 10-year Treasury yield climbed to around 4.79%, close to a 20-month high. In global markets, Asian markets have followed Wall Street lower this morning as investors reassess the impact of higher energy costs alongside the broader global bond sell-off, with South Korea's Kospi tumbling over 3%, Japan's Nikkei 225 index dropping nearly 3%, Shanghai's SSE Composite index and Hong Kong's Hang Seng index also trading lower. Wall Street closed lower on Tuesday, with the S&P 500 falling 0.7%, the Dow Jones Industrial Average declining 0.8% and the Nasdaq losing 1 per cent, as rising energy prices and bond yields intensified concerns tighter monetary conditions ahead.
Next week, markets will closely track US manufacturing activity, employment data and Fed communication, with any sharp change in US rate expectations potentially triggering a shift in foreign investor flows and increasing market volatility. As per The Financial Express, domestically, a steady initial public offering (IPO) pipeline is also absorbing liquidity, particularly from institutions and high-net-worth investors, exerting pressure on secondary-market returns. Eleven mainboard IPOs are scheduled to open next week, targeting more than ₹7,000 crore in aggregate, according to a Motilal Oswal Financial Services note. A meaningful fall in crude prices could offer some relief, but the bigger question is whether secondary-market earnings can sustain current valuations amid continuous equity supply. The current market recovery reflects cautious optimism rather than sustained bullish sentiment, with investors remaining watchful of global bond yields, US monetary policy, and domestic IPO activity.
