Markets, bonds fall as oil spikes
Indian markets declined on Tuesday after global crude oil prices climbed to $ 66 per barrel for the first time since 2015. Rising global crude oil prices stoked fears of higher fiscal deficit and inflation, impacting future interest rate decisions by the Reserve Bank of India (RBI). The benchmark Sensex declined 228 points to close at 33,228, with banking shares leading the declines. The Nifty 50 index fell 82 points to 10,240, while the India VIX index surged eight per cent to 15.3, signalling more volatility. Yield on the 10-year benchmark government bonds closed at 7.19 per cent, after touching a high of 7.23 per cent. Brent crude oil, the international benchmark for oil prices, jumped after the shutting down of the Forties North Sea pipeline knocked out significant supply from a market that was already tightening due to Opec-led production cuts. The annual retail inflation accelerated in November to a 15-month high of 4.88 per cent, data released by the government after market hours showed. Faster rises in prices of food and fuel products could pressure the RBI to take a hawkish stance on rates. Last week, the bond markets had taken solace when the RBI statement was not as hawkish as some had feared. “Rising oil price casts caution over the inflation trajectory. Rate-sensitive stocks underperformed ahead of economic data. Mixed trend in global market ahead of the US Federal Reserve meet also slowed down the domestic sentiment,” said Vinod Nair, head of research, Geojit Financial Services.