As Crude Prices Surge, India's M-Cap Drops Below US$ 5 Trillion
New Delhi: With crude oil prices surging above US$100 a barrel and United States bond yields climbing above 5%, Indian equities witnessed a sharp sell-off on Tuesday (September 15), pushing the combined market value of companies (m-cap) listed on the Bombay Stock Exchange (BSE) to a three-month low, below US$5 trillion, Economic Times reported citing BSE data.
According to the report, the combined market capitalisation of listed companies declined to $4.92 trillion, lowest since June 11. Market value fell by nearly US$380 billion from around $5.3 trillion at the beginning of the year. The yield on the benchmark 10-year US Treasury rose to 5.041%, its highest since 2007, on Tuesday, as inflation concerns increased.
India's share of global m-cap also fell to 2.95%, lowest since June 3.
Sensex dropped 778 points on Tuesday, to 74,003.81, its lowest level since June 11, while Nifty dropped 280 points or 1.2% to 23,118.60, lowest in five months and a level last seen on April 6.
Higher oil prices are reviving inflation concerns, while heavy government borrowing globally is pushing bond yields higher, Kresha Gupta, director and fund manager, Steptrade Capital, told the daily.
The falling rupee and expectation of a repo rate hike has further jolted the investors’ sentiment, triggering a sharp selloff.
Amid US-Israel-led war in West Asia, crude prices surged again to reach US$ 128.70 a barrel on September 14.
According to a report by The New Indian Express, the crude basket in September averaged at US$109.76 a barrel, up from $90.19 in August and $82.04 in July. The latest price is 43% higher than July’s average.
Meanwhile, experts believe that Indian equities may remain weak for some time.
"Indian equities are likely to remain weak amid elevated crude prices, renewed inflation concerns and uncertainty ahead of the US Federal Reserve's policy decision," Siddhartha Khemka, head of research, Wealth Management, Motilal Oswal Financial Services, was quoted as saying to ET.
The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.
