Pulse of the Street: oil surge and rate hike fears trigger a market sell-off

Indian stocks fell for a fifth straight week on Friday as a widening war in West Asia sent crude oil prices soaring, stoking inflation concerns and raising market expectations of a rate hike at the upcoming Fed meeting. The benchmark Sensex fell 2.3% over the week, while the Nifty 50 declined 2.1%, marking their steepest weekly drop since 24 July. On Friday, Indian equities faced a sharp sell-off, dragging the Nifty 50 to a three-month low. The Sensex and Nifty recovered from their intraday lows but still ended 0.16% and 0.34% lower at 74,781.8 and 23,398.10, respectively. Analysts said crude oil remained a major concern, as Brent held above $100 a barrel amid an escalation in the West Asia war. Crude oil prices surged due to escalating US-Iran tensions and attacks on Saudi energy infrastructure, pushing the 10-year US Treasury yield to 4.95-4.97%, its highest level since October 2023 and close to the critical 5% threshold. This sets the stage for a potential rate hike at the 16 September US Fed meeting. The prospect of a Fed rate hike, which could tighten global financial conditions and push interest rates higher, triggered a risk-off move in rate-sensitive sectors. Realty emerged as a standout underperformer, with the BSE Realty index falling 6.4% this week, followed by the BSE IT index, which dropped 5.3% amid heightened concerns over artificial intelligence disruption. Global equities continued to navigate geopolitical instability, elevated US Treasury yields, and shifting sentiment around the AI trade. South Korea's equity market proved resilient, topping global benchmarks with a 3.3% weekly gain, followed by Brazil's Ibovespa index, which rose 1.7%. Most other major markets closed in the red, with Hong Kong's Hang Seng index plunging the most at 3.1%, closely followed by Indian equities as the second-worst performer. Foreign portfolio investors snapped their recent buying streak, net selling ₹ 13,138 crore in September so far and unwinding the inflows recorded over July and August. Rate decisions from the US Fed and the Bank of Japan next week, together with crude oil trends, will determine near-term market direction.