Sensex tumbles 1,100 points and Nifty breaks 22,800: What is driving the fall?

Indian stock markets came under intense selling pressure on Monday, with the Sensex falling nearly 1,100 points and the Nifty dropping more than 350 points. The sell-off comes after the Nifty had already declined for seven consecutive weeks.

Here are the 5 key triggers behind the market fall:

Crude oil crosses $107

Rising crude oil prices are one of the biggest concerns for Indian markets. Brent crude is trading above $107 a barrel, while West Texas Intermediate crude is above $95.

Oil prices have surged as tensions around the Strait of Hormuz continue, with no diplomatic breakthrough between the US and Iran. For India, higher crude prices can increase the import bill and add to inflationary pressures.

US bond yields climb

The rise in crude prices is also fuelling concerns about inflation and interest rates globally. The US 10-year Treasury yield has climbed back to around 5.2 per cent, while the 30-year yield is above 5.5 per cent.

Higher US yields can make dollar-denominated assets more attractive and put pressure on emerging-market equities.

Fed rate-hike bets return

Expectations of further monetary tightening in the US have added to the pressure. CME FedWatch data shows a 68.1 per cent probability of a 25-basis-point Federal Reserve rate hike in October.

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The prospect of higher US interest rates is negative for risk assets, including equities in emerging markets.

Nifty breaks the 23,000 mark

Technical factors have accelerated the decline. The Nifty 50 had managed to hold the 23,000 level throughout last week, but that support was broken soon after Monday’s market open.

Analysts had flagged the 22,800–22,700 zone as the next important area if the 23,000 support failed. The index is now testing that range.