Indian equities have recently faced significant pressure, grappling with a confluence of factors including escalating US Treasury yields, persistently high crude oil prices, and substantial selling by foreign investors. Financial expert CA Sarthak Ahuja has shed light on how these global economic shifts are influencing capital flows and, consequently, the attractiveness of Indian stocks.
US Bond Yields Impact Global Capital
Ahuja's core argument centers on the principle that rising US Treasury yields make dollar-denominated assets increasingly appealing to global investors. When investors sell existing US government bonds, their market prices decline. As the bond's interest payment remains fixed, this price drop translates into a higher yield, making these fixed-income assets more lucrative.
With the US 10-year Treasury yield reportedly above 5.1% and the 30-year yield around 5.4%, such returns can incentivize investors to reallocate funds towards US fixed-income instruments. This shift can diminish the allure of riskier emerging-market assets, including Indian equities, as investors seek higher, more secure returns in the US.
Indian Market Under Pressure
The impact on the Indian market was particularly evident in September. The Nifty 50 index concluded the month down 6.1%, marking its most significant monthly decline since 2018. This downturn was exacerbated by the aforementioned global bond yields, elevated crude oil prices, and aggressive selling by foreign portfolio investors (FPIs).
During September, FPIs withdrew a substantial ₹25,662 crore from the Indian secondary equity market, ending a two-month period of net buying. Conversely, domestic institutional investors (DIIs) provided crucial support, injecting ₹52,617 crore into the market. The total market capitalization of NSE-listed companies stood at approximately ₹467 lakh crore at the end of September, a decrease from ₹469 lakh crore in June, though still considerably higher than the ₹410 lakh crore recorded in March 2026.
Sectoral Downturn and Broader Challenges
All sectoral indices experienced declines in September, with the Nifty IT index suffering nearly a 12% fall. Individual stocks like Bajaj Finserv and Infosys saw significant drops of 14.3% and 12.3%, respectively.
Beyond market dynamics, Ahuja also highlighted broader challenges impacting the Indian economy. These include rupee depreciation, perceived limitations in frontier AI innovation, low research and development spending, and ongoing concerns regarding employment generation.
Moving forward, market participants will closely monitor several key indicators: second-quarter earnings reports, crude oil price movements, FPI flows, the Reserve Bank of India's policy decisions, geopolitical developments, tariff changes, and the demand generated during the upcoming festive season. In this uncertain environment, Ahuja advises individuals to prioritize job security and personal upskilling.