The trading session on Thursday witnessed Indian equity indices racing lower, with the Sensex and Nifty indices testing heavy selling pressure as the day wore on.
Sensex started 150 points lower than earlier levels while Nifty began close to 70-points lower during trading. Volume was particularly high during the day, with the Sensex down 1,070 points, and the Nifty losing 365 points by 1:50 pm.
The market weakness was also heard a day after the RBI changed its monetary policy stance from “neutral” to “calibrated tightening. The shifting tone in the posture underscored the emphasis on controlling inflation and financial conditions, adding to investors’ concerns.
The another significant factor was Crude Oil prices rise. The price of Brent crude rose 3.9 per cent to its highest point of the day, $104.09 per barrel. Tensions in the Middle East remained a factor that bolstered oil prices, as did worries of supply disruption.
Indian investors closely monitor the rise in crude prices owing to country’s high dependence on crude oil import. If oil prices rise persistently, import prices will go up and inflation and rupee and corporate margins will be under threat.
The RBI policy stance proved to be restrictive, crude prices have gone up and there was a general risk aversion factor that dampened investor confidence. The plummeting of the benchmarks showed the heightened fears on how external cost pressures and stricter finance and banking environment is likely to affect the Indian economy and businesses.