Benchmark domestic equity indices, the Sensex and Nifty, plunged around 1.2% today as IT stocks extended their rout amid persistent concerns over artificial intelligence-led disruptions. The Sensex tanked 1,690 points to close at 82,226, while the Nifty slipped 288 points to settle at 25,425. Earlier, the markets opened under selling pressure, tracking sharp declines in the US markets. The sell-off intensified in the afternoon trade, led by a fall in technology shares and volatility amid the monthly expiry of Futures and Options contracts of Nifty.
The technology pack emerged as the epicentre of the massive fall, with the Nifty IT index declining as much as 2.63%, with all constituents trading in deep red. Among the top laggards in the Sensex pack, Tech Mahindra sank 6.6%, HCL Tech slipped 6.1%, and Eternal dropped nearly 5.3%. In the Nifty 50, major IT stocks including Infosys, Tata Consultancy Services (TCS), Wipro, Persistent Systems, Coforge, Oracle Financial Services Software and others declined in the range of 2-3% each. The fall in IT stocks came amid a broader weakness in the Indian stock market, dragged by weak global cues, as rising crude oil prices and surging bond yields dented risk-appetite.
The Indian bond market saw a downturn, reflecting a broader global selloff in debt markets. Indian government bonds edged lower on Tuesday, with the benchmark 6.94% 2036 bond yield settling at 6.9581% after a volatile session, compared to 6.9452% on Monday. The yield rose to 6.9653% earlier in the day, its highest intraday level since June 11, before recovering slightly as local banks, led by state-run lenders, likely stepped in to buy on dips. Foreign investors turned marginal sellers of Indian bonds last month, posting their first monthly outflow of the financial year with ₹8.5 billion ($89.54 million) offloaded under the Fully Accessible Route in August. A primary drag on global equities was an aggressive selloff in fixed-income markets, highlighted by the benchmark 10-year Japanese government bond yield rising to a generational high, with the global re-pricing of interest rate curves pushing U.S. Treasury and European borrowing costs higher. Global bond yields spiked amid concerns over rising inflation and government debt levels, with the benchmark US 10-year Treasury yield surging 3.8 bps to 4.796%, its highest level since 2023.
Geopolitical risks intensified over the long weekend following direct U.S.-Iranian military exchanges: U.S. forces carried out targeted kinetic strikes against Iranian rocket launchers on Larak Island in the Strait of Hormuz, triggering retaliatory missile strikes from Tehran against U.S. military bases in Jordan. Brent crude jumped toward $91 a barrel as the conflict threatened prolonged shipping disruptions through the Strait of Hormuz, while WTI crude advanced more than 2% to trade close to $88 per barrel. The rally followed renewed US-Iran ground strikes and increasingly aggressive rhetoric from Washington, including threats of further military action. While higher crude supported London's energy majors, it injected fresh cost-push inflation fears into broader UK equity sectors. All three Wall Street indices declined on Tuesday, amid a spike in crude oil prices and Treasury yields on fading hopes for a near-term solution to the US-Iran war.
According to SBI Securities, the Nifty IT index has been consolidating within the 31,955 – 30,034 range since the end of July, with the index largely oscillating between its 200-day and 100-day EMAs. Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, noted that the index has seen a sharp 20% rebound from the July 1 low of 25,699, followed by a month of consolidation, which can be viewed as a healthy pause after a sharp move. "This consolidation follows a sharp 20% rebound from the July 1 low of 25,699. In other words, the Nifty IT index saw a strong one-month recovery, followed by a month of consolidation, a pattern that can be viewed as a healthy pause after a sharp move," Shah explained. According to him, a decisive breakout on either side of the 31,955 – 30,034 range is likely to provide the next directional cue for Nifty IT. Despite foreign outflows, ample banking system liquidity with surplus swelling to ₹6.65 trillion on Monday, its highest since April 2022, helped support bond demand and stabilize market conditions.
