India’s Market Capitalisation Falls Below $5 Trillion as Crude Oil Prices Surge

India’s stock market came under renewed pressure on Tuesday, September 15, as a sharp rise in crude oil prices and higher US Treasury yields weighed on investor sentiment.

According to Economic Times, citing Bombay Stock Exchange (BSE) data, the combined market capitalisation of companies listed on the BSE fell to $4.92 trillion, marking its lowest level in about three months. The decline came as crude oil prices climbed above $100 a barrel amid escalating tensions in West Asia.

The latest figure represents a significant drop from the roughly $5.3 trillion market value recorded at the beginning of the year.

India’s Market Value Drops to Three-Month Low

The total market capitalisation of BSE-listed companies declined to its lowest level since June 11, according to the report.

India’s share of global equity market capitalisation also slipped to 2.95%, its lowest level since June 3.

The domestic benchmark indices recorded steep losses during Tuesday’s session. The Sensex fell 778 points to 74,003.81, its lowest closing level since June 11. The Nifty declined 280 points, or around 1.2%, to 23,118.60, marking its weakest level in five months.

Rising crude prices have emerged as a major concern for investors because India remains heavily dependent on imported crude oil. A sustained increase in energy costs can add pressure to inflation, the current account balance and corporate profitability.

Crude Oil Prices Surge Amid West Asia Conflict

The latest market sell-off came as crude prices continued to rise amid the ongoing US-Israel-led conflict in West Asia.

India’s crude oil basket reportedly touched $128.70 a barrel on September 14, according to The New Indian Express.

The publication reported that India’s crude basket averaged $109.76 a barrel in September, compared with $90.19 in August and $82.04 in July. The September average was therefore around 43% higher than July’s average.

The increase in crude prices has heightened concerns over the potential impact on inflation and India’s import bill.

US Treasury Yields Add to Market Pressure

Indian equities were also affected by a rise in US bond yields.

The yield on the benchmark 10-year US Treasury climbed to 5.041% on September 15, its highest level since 2007, according to the Economic Times report.

Higher US yields can influence global capital flows because they can make dollar-denominated assets relatively more attractive. For emerging markets such as India, this can contribute to pressure on equities and the domestic currency.

The combination of expensive crude oil, higher US yields and inflation concerns has consequently added to the uncertainty surrounding Indian markets.

Falling Rupee and Rate-Hike Concerns Weigh on Sentiment

Market sentiment has also been affected by weakness in the Indian rupee and expectations surrounding monetary policy.

Kresha Gupta, director and fund manager at Steptrade Capital, told Economic Times that higher oil prices were reviving inflation concerns, while increased government borrowing globally was contributing to higher bond yields.

The possibility of tighter monetary policy has added another layer of uncertainty for investors. Expectations of a potential repo rate increase can affect borrowing costs and economic activity, while higher yields can also influence equity valuations.

Indian Equities Could Remain Under Pressure

Market analysts have warned that volatility could persist if crude prices remain elevated and uncertainty around global monetary policy continues.

Siddhartha Khemka, head of research at Wealth Management, Motilal Oswal Financial Services, was quoted by Economic Times as saying that Indian equities could remain weak amid elevated crude prices, renewed inflation concerns and uncertainty surrounding the US Federal Reserve’s policy decision.

For Indian investors, developments in crude oil prices, the rupee, US Treasury yields and central-bank policy are likely to remain important market indicators in the near term.

The fall in India’s aggregate market capitalisation below $5 trillion reflects the broader pressure on equities following Tuesday’s sell-off. The direction of crude prices and global interest rates will remain key factors in determining how markets respond in the coming sessions.