Markets fall most in 2 weeks on rising yields; Sensex declines 844 points

Rising bond yields and the worsening geopolitical situation saw the Indian indices post their biggest fall in two weeks. The benchmark Sensex finished at 57,147, with a decline of 844 points, or 1.5 per cent, the most since September 26. The Nifty ended the session at 16,983 points, with a fall of 257 points, or 1.5 per cent.

Most global markets, particularly in the US, have seen huge declines following the release of strong jobs data in the US on Friday, but Indian markets had managed to escape with minor cuts. However, the latest fall shows that the domestic markets cannot remain immune to global turmoil for too long, said experts.

Bond yields in the US rose amid worries over high inflation ahead of the release of fresh data on Thursday.  The two-year US bond yield rose to its highest since August 2007 and was trading at 4.3 per cent.

The 30-year US bond yield was trading at 3.9 per cent — the highest since January 2014. Meanwhile, the 10-year Treasury once again edged towards 4 per cent after retreating to 3.6 per cent levels earlier in the month.

Rising yields will strengthen the dollar. So money would go back on account of currency depreciation and because of the correction. Risk capital always shuns emerging markets whenever there is a hike or uncertainty,” said UR Bhat, cofounder, Alphaniti Fintech.

Analysts said the wild swing in US yields reflected investor confusion about whether the inflation had peaked or had taken a pause before rising higher.

Major equity markets across Europe and Asia declined amid concerns about hawkish central bank policies and high inflation.

Equity markets are likely to be volatile ahead of Thursday’s US inflation data. If the print is higher than expected then the case for another 75-basis point hike will get stronger. So far, the Federal Reserve officials have shown no inclination to hit the brake on rate hikes. The Fed has hiked rates by 75 basis points in three consecutive meetings.

Aggressive hikes are coming and there will be further hikes in Europe and the US. Risk capital is going to be sparse and a chunk of it will be going to the US. Markets are highly volatile and during such times the US is considered a safe haven. FPIs are likely to be big sellers,” said Bhat.

On Tuesday, FPIs sold shares worth Rs 4,612.67 crore.

Going forward, the earnings season in India, and the US, which will begin this week, will give a picture of how rising interest rates and consumer inflation has hit profits.

Investors’ caution ahead of the announcement of US inflation data prevented a better-than-expected start to IT earnings from improving market mood,” said Vinod Nair, head of research, at Geojit Financial Services.

Russian President Vladimir Putin’s threat of further missile attacks on Ukraine, after hitting Kyiv and other cities, worsened investor sentiments. The Russian President’s warnings come after the country carried out the most intense strikes since the early days of its war on Ukraine.

The market breadth was weak with 2,408 stocks declining and 1,037 advancing. Barring two, all index constituents declined. Reliance Industries fell 2.02 per cent and contributed the most to Sensex’s decline. Infosys fell 2.6 per cent and ICICI Bank by 1.3 per cent.