1 hr ago
Indian Shares Face Pressure From Oil, High US Yields
Indian share prices have been falling for several weeks.
Two major problems are making investors nervous: expensive oil and high interest rates in the United States.
India imports about 90% of the oil it uses, so higher prices make the country spend more money abroad.
This can weaken the rupee and increase prices for fuel, food and other goods.
High US bond yields can also encourage investors to move money away from India.
Foreign investors have sold a large amount of Indian shares this year.
However, Indian institutions have continued buying shares and have softened the decline.
Some analysts believe shares are now cheaper and that company profits can keep growing.
The market may recover if oil prices fall, US yields decline and earnings remain strong.
The BSE Sensex fell 1.52% and the Nifty 50 dropped 1.56% on Monday.
Brent crude moved toward $110 a barrel as hopes for a quick US-Iran deal faded.
The 10-year US government bond yield rose above 5%, near its highest level since 2007.
Foreign portfolio investors have sold about Rs 2.45 lakh crore, or $30 billion, of Indian equities this year.
Analysts see risks from oil and high US yields, although lower valuations, domestic buying and earnings growth offer support.
- Who
- Indian companies, domestic institutions, foreign portfolio investors and market analysts are involved.
- What
- Indian stocks are under renewed selling pressure amid rising oil prices, high US bond yields and a weak rupee.
- Where
- The pressure is affecting India’s BSE Sensex, Nifty 50 and broader Indian equity market.
- When
- The latest decline occurred on Monday; the Nifty has fallen for seven consecutive weeks, and analysts are watching the coming week for possible RBI rate action.
- Why
- Higher oil costs threaten India’s trade balance, inflation and company profits, while high US yields make dollar investments more attractive and can draw money out of India.
Bearish View
Bullish View
Oil and macroeconomic risks
Bearish View
Analysts warn that oil above $100 a barrel could widen India’s trade deficit, weaken the rupee, raise inflation and increase costs for companies and consumers.
Bullish View
The risks could ease if crude prices fall and the rupee remains near current levels, potentially encouraging foreign investors to return.
Foreign investment
Bearish View
High US bond yields and a weak rupee make India less attractive to foreign investors, who have already sold about $30 billion in Indian equities this year.
Bullish View
Domestic institutional investors have invested $177 billion over two years, providing a cushion while overseas investors sell.
Market outlook
Bearish View
The Nifty’s seven-week decline and continued pressure on fuel-sensitive companies suggest further selling may occur in the short term.
Bullish View
Motilal Oswal Financial Services says valuations have become more attractive, with large-cap shares 29% below their peak valuation and mid-caps 27% lower, while earnings and domestic growth remain resilient.
Key facts
- Monday’s market move
- The BSE Sensex fell 1.52% and the Nifty 50 declined 1.56%.
- Oil price
- Brent crude futures were moving toward $110 a barrel.
- US bond yield
- The 10-year US government bond yield topped 5%, near its highest level since 2007.
- Nifty decline
- The Nifty is down 12% from its September 2024 record peak of 26,300.
- Foreign selling
- Foreign portfolio investors sold about Rs 2.45 lakh crore, or $30 billion, of Indian equities this year.
- India’s oil imports
- India imports about 90% of the crude oil it consumes.
- Domestic support
- Domestic institutional investors invested $177 billion in Indian equities over the past two years.
Quotes
Sonam Srivastava
Founder and fund manager of Wright Research
“If crude prices ease and the rupee holds near current levels, I would expect FPI (Foreign Portfolio Investor) flows to turn positive again by the December quarter”
telegraphindia.com
“If the currency remains weak, FIIs will not have the confidence to come back.”
telegraphindia.com
Sources
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