Indian equity markets came under heavy selling pressure on Thursday, with the Nifty 50 falling 216.50 points, or 0.92%, to 23,230.30 and the Sensex declining 667.51 points, or 0.89%, to 74,160.74.
The sell-off followed weakness in global markets as a sharp rise in US Treasury yields, higher crude oil prices, a stronger dollar and renewed geopolitical uncertainty weighed on investor sentiment.
US Treasury yields surge
The biggest pressure came from a global bond sell-off. The US 10-year Treasury yield climbed above 5.1%, reaching its highest level since 2007, after stronger-than-expected US economic data and weak demand at a $70 billion five-year Treasury auction. The five-year yield also moved above 5% for the first time since 2007.
Higher US bond yields can make dollar-denominated assets more attractive and increase concerns that borrowing costs may remain elevated for longer, putting pressure on emerging-market equities.
Oil and global uncertainty weigh
Brent crude remained above $100 a barrel after a sharp rise, adding to inflation concerns and pressure on oil-importing economies such as India. The stronger dollar has added another challenge for emerging-market assets.
Investors are also monitoring uncertainty surrounding the US-Iran situation and upcoming US-China trade and technology discussions, adding to broader risk aversion.
Fed rate hike expectations rise
Markets have also increased expectations of another US Federal Reserve rate increase. Stronger US business activity data and comments from Federal Reserve Governor Michael Barr contributed to the shift in rate expectations.
The combination of higher Treasury yields, elevated crude prices, a stronger dollar and expectations of tighter US monetary policy has added pressure to Indian equities, extending the market decline on Thursday.