High oil prices trigger sell-off in markets, ₹ falls most in 7 weeks

MUMBAI: A sell-off spurred by rising crude oil prices caused the biggest single-day percentage fall in the BSE Sensex since June 27 on Tuesday.

The rupee fell the most in seven weeks, and government bond yields surged, as investors fretted that expensive oil may led to a fiscal slippage, inc7rease inflationary pressures and lower the chances of the Reserve Bank of India cutting interest rates in its December monetary policy review. Bond prices and yields move in opposite directions.

The Sensex closed down 360.43 points, or 1.07%, to 33,370.76 points. The National Stock Exchange’s Nifty, too, closed 101.65 points, or 0.97%, down at 10,350.15. Markets across the globe were strong with Japan’s Nikkei Index jumping to a 26 year-high.

Rising crude prices are one of the main reasons for the market correction, said Arun Thukral, MD and CEO, Axis Securities Ltd.

Brent crude touched a 28-month high of $ 64.10 per barrel on an anti-corruption purge by Saudi Arabia’s crown prince. Shares of oil marketing companies (OMCs) and aviation firms reacted negatively.

“The markets cracked largely due to rising crude oil prices, disappointing September earnings from a few companies and weakness in pharma stocks. Rupee has also started to weaken which may have impacted markets. The markets were in overbought zone and (investors) were looking for a reason to sell off,” said Deepak Jasani, head of retail research at HDFC Securities Ltd.

Due to the increase in oil prices, the yield on the benchmark 10-year bond surged to a fresh sixmonth high while rupee dropped most in nearly seven weeks. The 10-year bond yield closed at 6.927%, a level last seen on 11 May, compared to its previous close of 6.858%.

The domestic currency weakened past the 65-mark against the US dollar. The rupee fell 0.54%, its steepest fall since 21 September, to close at 65.03 a dollar.

THE FALL IN THE RUPEE LED TO A RALLY IN TECHNOLOGY STOCKS, WITH THE BSE IT INDEX RISING 2% ON TUESDAY