US debt concerns roil stock markets; Sensex and Nifty end 0.8% lower

Trump's $3.8 trillion tax plan stokes debt fears; Sensex drops 645 points

Indian equities fell on Thursday, joining a global selloff as concerns over the US fiscal outlook and rising bond yields led to heavy foreign portfolio investor (FPI) selling. The Sensex ended the session at 80,952, down 645 points, or 0.8 per cent. The Nifty closed at 24,610, losing 204 points, or 0.8 per cent.

 

For the week, the Sensex slipped 1.7 per cent, while the Nifty shed 1.6 per cent. The total market capitalisation of BSE-listed firms dropped by ₹2.2 trillion to ₹439 trillion. Though India Vix — a gauge of market volatility — fell 1.7 per cent to 17.3, it climbed 4.3 per cent for the week.

 

Investors are on edge over the impact of US President Donald Trump’s tax Bill, which the House of Representatives narrowly passed. The tax-and-spending package, fulfilling several of Trump’s populist promises, is expected to add about $3.8 trillion to the US government’s $36.2 trillion debt over the next decade.

 

Debt concerns triggered a credit rating downgrade by Moody’s last week. Longer-dated US bond yields climbed, with the 30-year yield touching 5.1 per cent — the highest since October 2023. Rising yields make US bonds more appealing and often prompt FPIs to pull back from emerging markets, including India.

 

FPIs were net sellers of ₹5,045 crore on Thursday, while domestic institutions bought shares worth ₹3,715 crore. FPIs have been aggressive sellers this week; on Tuesday, they offloaded shares worth ₹10,016 crore.

 

The dollar index edged up on Thursday to 99.8. Though it dipped during the session, gold has gained 3 per cent this week, trading at $3,302 per ounce. 

 

 

The course of Indo-US trade talks and the monsoon’s progress will shape market direction in the near term.

 

“The key benchmark indices declined amid concerns that the proposed US budget could sharply raise national debt, pushing up treasury yields due to weak long-term bond demand. Adding to the pressure, a major credit rating agency’s downgrade of the US credit outlook triggered broad selloffs across Asian markets. Despite an improvement in India’s Purchasing Managers’ Index for May and signs of fiscal stability, lingering uncertainty around US-India trade negotiations and global volatility are likely to keep Indian equities in a range-bound zone for now,” said Vinod Nair, head of research at Geojit Financial Services.

 

Market breadth was weak, with 2,275 stocks declining and 1,661 advancing. Barring three, all sectoral indices on the BSE ended in the red. Reliance Industries, down 1.36 per cent, was the biggest drag on the Sensex, followed by Mahindra & Mahindra, which declined 2.6 per cent.

 

“The drop was largely due to weak global cues, especially from US markets, in the absence of meaningful domestic triggers. The recent foreign fund outflow has further pressured sentiment. Going ahead, the Nifty must stay above its 20-day exponential moving average near 24,450. A breach could lead to more profit-booking and push the index down to the 24,100 zone,” said Ajit Mishra, senior vice-president of research at Religare Broking.