Indian blue-chips fell on Tuesday to log their worst month in 2023 as elevated U.S. interest rates triggered persistent sales by foreign investors, while a rise in oil prices due to the Middle East conflict also added to the selling pressure.
The benchmark NSE Nifty 50 fell 0.32% to 19,079.60, while the S&P BSE Sensex settled 0.37% lower at 63,874.93. They have lost nearly 3% each in October.
The concerns around the Middle East conflict have led to a spike in oil prices, a negative for net importers like India.
More tellingly, the U.S. Federal Reserve's rhetoric of higher-for-longer rates has helped send U.S. Treasury yields to multi-year highs, making them more attractive for investors.
As a result, foreign investors have offloaded 228.50 billion rupees ($2.74 billion) worth of Indian shares so far in October, the most for any month since January.
The Fed is widely expected to hold rates at its policy decision after the bell on Wednesday, but Chair Jerome Powell's commentary will be key.
Any indication of rates remaining high for a prolonged period will weigh on IT stocks, which have already warned of weak spending by their U.S. and European clients. The IT index lost 0.19% on the day and 3.78% for the month - its worst in 2023.
"The domestic market is factoring prolonged high interest rates in the U.S. The persistent foreign selling in Indian shares due to higher U.S. yields will also trigger consolidation," said Pramod Gubbi, founder of Marcellus Investment Managers.
Also weighing on sentiment was a drop in Asian markets after the Bank of Japan tweaked its bond yield control policy.
Auto stocks lost 0.67% ahead of monthly sales data. Mahindra and Mahindra, Eicher Motors fell 2.62% and 1.85% respectively, and were among the top losers on the Nifty.
Sun Pharma lost 2.39% on multiple block deals.
