Stocks plummet as crude nears $100
NEW DELHI, MUMBAI : Indian benchmark indices saw their steepest single-day drop in two months, declining over 1% on Wednesday, dragged down by selling in HDFC Bank and other index heavyweights. Weakness in global markets, with crude oil prices nearing $100 a barrel, also made investors cautious ahead of the US Federal Reserve’s policy meeting. The Sensex closed 1.2% down at 66,800.84 and the Nifty by a similar margin to 19,901.4.
US 10-year bond yields rose to a 16-year high as Brent crude hovered around $96 a barrel, up by about a third over the last three months after Opec+, a grouping of oil producing nations, cut output. While the US Federal Reserve is expected to largely keep rates on hold, high oil prices could force the US central bank’s hand to hike rates later this year. “We got to see what the Fed does.
It is likely to be a hawkish tone," said Andrew Holland, chief executive officer, Avendus Capital Public Markets Alternate Strategies. Higher bond yields in the US make equities, especially emerging market stocks, less attractive as an asset class. Rising oil prices, coupled with the goods trade deficit hitting a 10-month high in August, also stoked concerns about a rising current account deficit (CAD).
A worsening CAD could put pressure on the rupee and drive away foreign investors from investing in the Indian markets. On Monday, the local currency had touched a record low of 83.26 to a dollar before rebounding on Wednesday to 83.07 amid likely intervention by the Reserve Bank of India. Provisional data showed that foreign portfolio investors were net sellers of ₹3,110.69 crore worth of stocks in the Indian markets on Wednesday.
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