Indian stock markets faced a sharp sell-off on Thursday, with the Sensex falling 1,045 points and erasing ₹10 lakh crore in value. The decline followed the Reserve Bank of India’s surprise decision to hike the repo rate by 0.25% and adopt a tougher policy stance. Investors are now dealing with rising interest rates, elevated crude oil prices, and consistent foreign selling.
The Indian equity market witnessed a severe downturn on Thursday, as the Sensex tumbled 1,045.46 points to settle at 71,593.24. This sharp decline wiped out approximately ₹10 lakh crore in total market capitalization on the Bombay Stock Exchange in a single session. The selling pressure was broad-based, pulling the Nifty 50 down by 371.25 points to close at 22,231.80, which marks a 21-month low for the benchmark index.
The primary trigger for the market's negative reaction was the Reserve Bank of India's (RBI) surprise announcement. The central bank increased the repo rate by 25 basis points to 5.50% and shifted its monetary policy stance to 'calibrated tightening.' This move caught many investors off-guard, as higher interest rates typically lead to higher borrowing costs for companies. This can reduce profit margins and force a re-calculation of stock valuations, as money becomes more expensive to borrow.
Global pressures added further weight to the domestic decline. Brent crude oil prices climbed above $104 per barrel, raising concerns about higher import costs and domestic inflation. Additionally, rising US Treasury yields continue to attract global capital away from emerging markets, resulting in consistent selling by foreign institutional investors. The Indian market has been struggling with this liquidity drain for weeks, now marking an eight-week losing streak.
The combination of domestic interest rate hikes and global economic pressures has forced a re-evaluation of stock valuations across major sectors. Banking and automotive stocks, which are typically sensitive to interest rate changes, experienced significant volatility during the session as the cost of credit rises.
Looking ahead, investors will watch upcoming inflation data and future commentary from the RBI, as these will likely influence market sentiment in the coming weeks. The ability of the major indices to hold their current support levels will be a crucial factor to watch, given the current technical weakness and the ongoing trend of foreign fund outflows.