Tech Selloff Strikes Broad Front
Indian equities endured their sharpest single-session decline in nearly a month, with the Nifty 50 falling 1.16% to 23,824.1 and the Sensex shedding 893 points to close at 76,200.68. The immediate trigger was a global technology rout amplified by South Korea's Kospi plunging 10% and briefly triggering a circuit breaker, sending shockwaves through AI-heavy and semiconductor-exposed markets worldwide. The Nifty IT index bore the sharpest domestic wound, declining 2.23% to 27,012.05, consistent with the Nasdaq's 2.21% fall to 25,587.04 as investors reassessed the sustainability of debt-fuelled AI capital expenditure.
Fed Hawkishness Resets Global Risk Appetite
Markets are now pricing in a meaningfully higher probability of a second US Federal Reserve rate hike by December, a recalibration that drove the US dollar to a one-year high and pushed the Japanese yen near a four-decade low. This dollar surge is structurally uncomfortable for emerging-market currencies and equity flows, as higher-for-longer US rates raise the opportunity cost of holding risk assets in markets like India. The rupee slipped 11 paise to settle around 94.74, reflecting this dollar-driven pressure even as the INR/USD level stabilises near 94.72 in current trading.
PMI Slowdown Adds Domestic Complexity
Beyond the global storm, India's own macro picture introduced a note of caution: the HSBC Composite PMI dipped to 57.4 in June, a three-month low, as rising input costs and softening demand weighed on both manufacturing and services momentum. While a PMI above 50 still signals expansion, the direction of travel matters — manufacturer confidence has fallen to its weakest level in nearly four years, a signal worth monitoring against the backdrop of a potentially weak monsoon. India has activated contingency plans for over 315 districts as rainfall runs 43% below average, raising latent risks to rural incomes, food inflation, and consumption demand in the second half of the fiscal year.
Bond Markets Find a Silver Lining
Not all signals were bearish: Indian 10-year government bond yields slipped to a three-month low, anchored by easing crude oil prices — Brent crude trading at $76.64, down 0.57% — and receding geopolitical anxiety. Lower yields ease the government's borrowing cost and create a more accommodative financial conditions backdrop even as equity markets sell off. Anticipation of potential inclusion in a global bond index adds another layer of constructive sentiment for the fixed-income market, which could eventually channel sustained foreign currency inflows and provide indirect rupee support.
Capital Markets Activity Stays Busy
Axis Bank successfully raised $800 million through a dual-tranche dollar bond — $500 million via an AT1 perpetual and $300 million through a five-year senior bond — under the RBI's concessional swap facility, demonstrating that institutional credit appetite for quality Indian paper remains intact even during equity turbulence. Separately, the government is proceeding with an OFS of up to 2% in IRFC opening Wednesday, part of a disinvestment programme that has already raised ₹16,480 crore in FY25. Reports also indicate NSE and SBI Mutual Fund IPOs could collectively generate ₹5,400 crore in long-term capital gains tax, highlighting the breadth of capital markets activity running in parallel with the selloff.
FII Flows and Trade Talks Offer Longer Arc
Global funds snapped eight consecutive weeks of selling Indian equities last week, purchasing nearly $900 million of Indian shares as the oil shock ebbed — a potentially meaningful inflection point if sustained. On the trade front, Commerce Minister Piyush Goyal has begun high-level talks with US Trade Representative Jamieson Greer, with both sides reportedly close to finalising Phase 1 of a bilateral trade agreement. A deal could meaningfully reshape tariff exposure for Indian exporters and alter the medium-term attractiveness of India-facing supply chain investments, even as near-term market sentiment remains fragile.