Nifty Drops 1.56% as Brent Crude Nears $108 and Market Risks Rise

India’s key equity indices, the Nifty and Sensex, faced further declines on Monday, reflecting a broader downtrend seen across Asian markets. The fall was driven by a combination of rising crude oil prices, surging global bond yields, and ongoing geopolitical tensions in West Asia, all of which added pressure on investor sentiment.

By the close of trade, the Nifty index had dropped 1.56 percent, settling at 22,780.25 points. This marks its lowest level since early April, roughly five months ago. The Sensex similarly dropped 1.52 percent to end at 72,771.72 points. These declines pushed the National Stock Exchange’s total market capitalization below the $5 trillion mark, finishing at $4.89 trillion on Monday.

The dip was felt across various segments, with banks experiencing the steepest losses amid a sharp rise in bond yields. The Nifty Midcap 150 and Smallcap 250 indices each fell by 1.63 percent, indicating a broad-based selloff.

Christy Mathai, a fund manager at Quantum Mutual Fund, explained that global macroeconomic factors are heavily influencing Indian markets. Elevated crude oil prices continue to dampen sentiment, while rising yields on US and Japanese government bonds have led global investors to reduce exposure to emerging markets like India.

On Monday evening, Brent crude futures hovered around $108 per barrel, a level that adds cost pressures to the Indian economy. The US 10-year Treasury yield reached its highest point since June 2007, intensifying the cautious mood. Meanwhile, Indian 10-year government bond yields hit 7.18 percent, a two-year peak.

Asian markets broadly fell as well, with Japan, China, and South Korea experiencing declines ranging from 0.7 to 2.7 percent. Hong Kong, however, bucked the trend with a modest 0.54 percent gain.

Looking at year-to-date performance, the Nifty 50 has slipped 7.5 percent, while the Midcap 150 index dropped 1.3 percent. The Smallcap 250 index remains in positive territory, rising 7.17 percent so far this year.

Pankaj Pandey, head of fundamental research at ICICIdirect, noted that large-cap stocks are under pressure for several reasons. These include concerns about rising bond yields affecting public sector banks, regulatory changes from the Insurance Regulatory and Development Authority impacting private banks, and leadership transitions at major financial institutions such as HDFC Bank, Kotak Mahindra Bank, and the Tata Group.

The Nifty Private Bank index declined 1.5 percent, while the PSU Bank index dropped 3.2 percent on Monday. Pandey suggested that weakness might continue in the near term unless crude prices moderate or the other concerns ease, which currently seems unlikely. He identified 22,200 as a key support level for the Nifty, with resistance near 23,500 points.

Volatility in the market also increased, with the Nifty India Vix rising 12.5 percent to close at 13.69 on Monday, signaling growing uncertainty among traders.

Despite these challenges, Mathai highlighted that India’s corporate earnings for the first quarter of 2026-27 showed strength, supported by price increases and lower inventory costs. However, sustaining this growth throughout the year remains a challenge. He pointed to signs of a broader earnings recovery after two years, with expectations of double-digit growth and some valuation adjustments among the top 150 companies.

On a related note, shares of the National Stock Exchange of India (NSE) slipped below their initial issue price, ending Monday at ₹1,762.7 per share, a 1.67 percent decline. The NSE had launched on the Bombay Stock Exchange on September 24 at ₹1,800 per share.

These developments come at a time when global economic uncertainty and energy market volatility continue to influence investment flows. For Indian markets, the combination of rising crude prices and higher bond yields presents a complex environment as investors weigh risks and growth prospects in the months ahead.