Indian equities extend fall on mighty $, rising crude oil

The Indian financial markets were singed across the board on Monday, with the rupee sinking beyond the psychologically crucial 86 to the Dollar mark, equity markets ending sharply lower and yields of Government Securities (G-Secs) surging.

Factors such as a strengthening dollar, hardening US Treasury yields and rising global crude oil prices weighed on the markets.

The Indian currency recorded its biggest single day fall in almost two years, closing at 86.5750 per Dollar , down 61 paise vis-a-vis previous close of 85.9650. Intra-day, it touched a low of 86.5825.

Since 2021, there have been 13 instances where the rupee has depreciated more than 60 paise in a single trading session, with the most recent occurrence being on February 6, 2023, when the rupee crashed 90 paise.

Harsimran Sahni, EVP – Head Treasury, Anand Rathi Global Finance, observed that the key driver that pressured the rupee was the strengthening of the dollar, supported by robust US job growth in December. This has increased expectations of a delay in rate cuts by the Fed, making the dollar more attractive to investors.

Sahni underscored that India has witnessed significant FPI outflows from equity markets so far in January as global investors shift towards higher-yielding assets. These outflows increased demand for dollars as foreign investors converted rupee assets into foreign currency.

“Domestically, our dependence on imported crude oil has worsened the situation. As US puts more and more harsh sanctions on Russian crude oil, it will lead to increase in global oil prices, thereby weakening the rupee,” Sahni said.

The bellwether 30-share BSE Sensex declined 1.36 per cent (or down 1,049 points) over the previous close to end at 76,330, with only four Sensex stocks – Axis Bank, TCS, HUL and IndusInd Bank – advancing and the rest ending in red.

The 50-share NSE Nifty fell 1.47 per cent (or down 346 points) over the previous close to end at 23,086, with only four Nifty stocks – Axis Bank, TCS, HUL and IndusInd Bank – advancing and the rest ending in red.

Siddhartha Khemka, Head-Research, Wealth Management, Motilal Oswal Financial Services Ltd, said Indian equities ended sharply lower on Monday for the fourth consecutive session.

“With this, Nifty has fallen almost five per cent in the last 7 trading sessions, hitting a 7-month low. The sell-off was broad-based, with all sectoral indices in the red. The Realty index led the decliners, falling 6.5 per cent, followed by Media, Metals & Consumer Durables,” he said.

Yield of the 10-year benchmark G-Sec hardened about eight basis points, the biggest single day rise in the yield in about seven months, amid rising US Treasury yields, higher crude oil prices and a depreciating Rupee. Yield of this security ended at 6.85 per cent against previous close of 6.77 per cent.

Vinod Nair, Head of Research at Geojit Financial Services, explained the global context: “The global markets witnessed a significant sell-off, prompting a similar response in domestic markets due to strong US payroll data suggesting fewer rate cuts in 2025. This has strengthened the dollar, driven up bond yields, and made emerging markets less attractive.”