India's stock market has just gone through a stretch that investors have not seen in roughly a quarter of a century.
The Nifty 50 and Sensex have fallen for eight consecutive weeks, marking the longest weekly losing streak for the benchmark indices in about 25 years. The latest decline has been driven by a combination of heavy foreign investor selling, elevated US Treasury yields, high crude oil prices, a weaker rupee and broader global uncertainty.
The numbers underline how difficult the recent period has been. During the holiday-shortened week ended October 1, the Nifty fell 3.11% to 22,421.95, while the Sensex declined 2.69% to 71,909.70. The Nifty's eight-week decline has now exceeded 8.5%.
But the duration of the fall is only one part of the story. The current decline has been relatively moderate compared with some earlier prolonged sell-offs in terms of percentage losses, even though its persistence has attracted considerable attention.
What Is Behind the Market Sell-Off?
There is no single reason behind the weakness. Instead, several global and domestic factors have started working in the same direction.
1. Foreign Investors Continue to Sell
Foreign portfolio investors have remained a major source of pressure on Indian equities.
FPIs sold about Rs 33,882 crore worth of Indian shares during the latest week, while domestic institutional investors bought around Rs 33,455 crore. Domestic buying has therefore provided an important cushion, but it has not been enough to completely absorb the selling pressure.
September was particularly difficult, with foreign investors remaining net sellers through most trading sessions.
The reason is closely linked to global asset allocation. When US bond yields rise and dollar assets become relatively more attractive, emerging markets such as India can face capital outflows.
2. US Treasury Yields Have Surged
One of the biggest global triggers has been the rise in US bond yields.
The 10-year US Treasury yield touched around 5.34%, its highest level since 2002, according to Reuters. Higher US yields can make dollar-denominated fixed-income investments more attractive while also increasing global borrowing costs.
For Indian equities, the concern is particularly relevant because a wider or changing yield differential can influence foreign portfolio flows.
In simple terms, investors are weighing the return available from Indian equities against the risk-free or relatively lower-risk returns available in US assets.
3. Crude Oil Moves Towards $100
Oil has added another layer of pressure.
Brent crude moved back above $100 a barrel amid concerns over global supply. For India, higher crude prices are particularly important because the country is a major oil importer.
Expensive crude can affect several parts of the economy at the same time:
- Increase India's import bill
- Put pressure on the trade balance
- Weigh on the rupee
- Increase inflationary concerns
- Raise input costs for businesses
- Affect corporate margins
This makes crude oil one of the key indicators investors are watching as the market enters the next phase.
4. Rupee Falls Towards Rs 96 Per Dollar
The pressure on equities has also been reflected in the currency market.
The Indian rupee fell 0.5% to Rs 96.315 per US dollar on October 1, marking its weakest level in two months. The decline came amid rising US yields, higher oil prices and continued foreign portfolio outflows.
A weaker rupee can have mixed effects on Indian companies. Export-oriented businesses may benefit from a weaker currency, while companies dependent on imported inputs can face higher costs.
The currency movement is therefore another important variable for investors to track.
RBI Forex Reserves Fall by $18.34 Billion
India's foreign exchange reserves also recorded a sharp decline.
According to RBI data, India's forex reserves fell $18.34 billion to $747.56 billion in the week ended September 25 . Foreign currency assets declined by about $15.57 billion, while gold reserves fell by around $2.59 billion.
The reserves had stood at a record $785.71 billion on September 4, meaning the stockpile has declined by around $38.15 billion over three weeks.
Some market participants have attributed part of the decline to RBI intervention in the foreign exchange market to manage excessive rupee volatility. However, the RBI's reserve data can also be affected by valuation changes in foreign currency assets and gold, and the central bank does not separately attribute each weekly change to intervention.
Domestic Investors Provide Some Support
While foreign investors have been pulling money out, domestic institutional investors have continued to buy.
That domestic participation has helped prevent the foreign outflows from translating into an even sharper decline.
The latest weekly figures illustrate the contrast clearly: FPI selling stood at approximately Rs 33,882 crore, compared with DII purchases of around Rs 33,455 crore.
However, domestic buying has not been sufficient to prevent the benchmark indices from extending their losing streak.
Midcaps and Smallcaps Also Feel the Pressure
The correction has not been restricted to the headline indices.
During the latest week, the BSE Midcap index declined 3.65% , while the BSE Smallcap index fell 2.64%.
This is important because broader-market stocks had previously attracted strong domestic participation. The recent selling suggests that global macroeconomic concerns are now affecting a wider section of the market.
Which Sectors Are Under Pressure?
Rate-sensitive and commodity-sensitive sectors have been among the areas facing stronger selling pressure.
Consumer durables, PSU banks, realty and metals were among the weaker segments during the latest week. Auto stocks also came under pressure following concerns around wholesale sales.
Information technology stocks were comparatively resilient, with the weaker rupee providing some support to exporters.
Rs 15 Lakh Crore Investor Wealth Eroded in One Week
The market decline has also translated into a significant fall in overall investor wealth.
The market capitalisation of BSE-listed companies fell from approximately Rs 481.9 lakh crore to Rs 467 lakh crore during the latest week, representing an erosion of around Rs 15 lakh crore.
Over the full eight-week losing streak, estimates of wealth erosion are substantially higher, with one analysis putting the figure at around Rs 28.29 lakh crore.
What Investors Will Watch Next
The next few weeks are likely to remain focused on a handful of major indicators.
- US Treasury yields: Any sustained move in global bond yields could influence foreign flows into emerging markets.
- Crude oil: Oil prices will remain important for India's inflation, trade balance and rupee.
- Foreign investor flows: Continued FPI selling could keep pressure on benchmark indices.
- Rupee movement: Currency stability will remain closely linked to oil prices and capital flows.
- Corporate earnings: Investors will also look for signs that the market correction is beginning to reflect itself in earnings expectations.
- RBI policy: The Reserve Bank's monetary policy decision will be another closely watched domestic event, particularly against the backdrop of rupee weakness and imported inflation concerns.
The Bigger Picture
The eight-week decline is certainly unusual, but the length of the losing streak should not be viewed in isolation.
Historical market data shows that previous extended losing streaks have sometimes involved substantially larger percentage declines than the current correction. The present episode stands out primarily because of its duration and the combination of global factors weighing on Indian assets at the same time.
For now, investors are watching whether global bond yields and crude prices begin to stabilise and whether foreign selling starts to ease. Until then, the combination of expensive oil, high US yields, currency pressure and overseas outflows is likely to remain central to the Indian market narrative.
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