Indian stock markets experienced a significant downturn on Monday, with the Nifty 50 and Sensex indices hitting their lowest levels in nearly six months. This decline comes amid rising global tensions and a surge in crude oil prices, which have surpassed $100 a barrel, exacerbating concerns about energy supplies and inflation.
The Nifty 50 dropped by 1.6%, closing at 22,780.25—its lowest since April 2—while the Sensex fell by 1.5%. The slide in the markets reflects a broader risk-averse sentiment affecting global markets, as major Asian markets also recorded declines.
The escalation in oil prices, with Brent crude futures reaching approximately $107 a barrel, has heightened fears of prolonged disruptions in the Strait of Hormuz. Such uncertainties are particularly concerning for India, which relies on imports for 90% of its oil needs. Sustained high oil prices could lead to an increased import bill, intensify inflationary pressures, and impact corporate profit margins and economic growth. Additional price hikes in LNG and fertilizers could further strain the economy.
So far this year, the Nifty has declined by about 13%, with the Nifty PSU Bank index falling by 3.2%. Realty and oil and gas stocks also suffered notable losses, and the rupee weakened by 0.2% against the US dollar, reaching 95.9850.
Rising global inflation and increasing US bond yields are adding to the pressure on emerging markets. The US 10-year Treasury yield is nearing 5%, raising concerns about potential capital outflows and limiting the ability of central banks to keep interest rates low.
Market participants are now closely monitoring the Reserve Bank of India’s upcoming policy review for insights into potential changes in interest rates, inflation, and economic growth. Continued strength in crude oil prices could further pressure the rupee and influence the central bank’s policy decisions.