Business

Why Indian stocks fell again as bond yields rose and foreign investors kept selling

Indian equities came under renewed pressure on Monday after a brief recovery, with the Sensex falling more than 1,000 points from its intraday high and the Nifty losing more than 300 points. Higher government bond yields, foreign selling and profit booking were cited among the main pressures on the market.

Editor: AI News 24x7 Published: 12 Oct 2026, 03:51 PM Updated: 12 Oct 2026, 03:51 PM

Why Indian stocks fell again as bond yields rose and foreign investors kept selling.

Indian shares faced heavy selling on Monday, reversing the recovery seen on Friday. The Sensex dropped more than 1,000 points from its intraday high and fell below 71,850 after 1 PM. The Nifty also registered a decline of more than 300 points.

The pressure came as investors responded to higher government bond yields in India and the United States, continued selling by foreign portfolio investors and profit booking after the previous week's gains.

Rising bond yields shift investor attention

The yield on the US 10-year Treasury bond moved above 5.3%, according to the supplied report. That rise increased the appeal of safer investment options and added pressure to equities.

India's 10-year government bond yield also climbed to 7.37%, its highest level in about 3 years. The increase followed measures announced by the Reserve Bank of India to reduce excess liquidity in the banking system.

Under the RBI's announced requirement, banks will have to maintain at least 99% of their cash reserve ratio requirement as a daily balance from the fortnight beginning 16 October. The earlier requirement was 90%.

This change has become an important part of the market discussion because it affects liquidity available within the banking system. The bond-yield movement and the RBI's liquidity measures have therefore added to investor caution around equities.

Foreign selling remains a major concern

Foreign portfolio investors have continued to sell Indian shares, creating another source of pressure for the market. Foreign institutional investors sold Indian equities worth ₹45,125 crore in six sessions during October.

That amount was close to the ₹45,536 crore sold during the whole of September. The comparison highlights how quickly foreign selling accelerated during the early part of October.

V.K. Vijayakumar, chief investment strategist at Geojit Investments, said the faster pace of foreign institutional selling in October had taken total FPI equity selling in 2026 to ₹3,60,952 crore.

The sustained outflow has made foreign investor activity a key factor for market participants watching the latest decline. It has also added to the effect of higher yields, which can make fixed-income investments more attractive relative to shares.

Profit booking adds to the decline

Profit booking was another factor behind Monday's fall. The Sensex and Nifty had ended the previous week higher, breaking a losing run that had continued for 8 weeks.

That recovery came despite several challenging conditions that required caution in the market. After the recent rise, some investors used Monday's session to book gains, contributing to the renewed selling pressure.

The supplied report also referred to wider geopolitical developments. Iran rejected the United States' recent response to its proposal to end the war, calling it inadequate, and warned that renewed fighting could lead to attacks on regional data centres and cables.

Yemen's Houthi rebels claimed responsibility for a Saturday attack on Riyadh's international airport, in which 13 people were reported killed and more than 300 injured. Saudi authorities also reported injuries in another attack at the airport on Sunday.

Conclusion

Monday's market decline reflected the combined effect of higher bond yields, tighter liquidity concerns, foreign selling and profit booking after the previous week's recovery. Investors are now focused on the direction of yields, overseas flows and the impact of the RBI's cash-reserve requirement.