 "Markets slide on high US yields, West Asia woes; Sensex falls 826 points")
Indian equity markets declined on Monday, with the benchmark Nifty50 index logging its worst session in more than seven months, as the 10-year US treasury yield crossed 5 per cent for the first time in 16 years and concerns over the Israel-Hamas conflict mounted.
The Sensex plunged 826 points, or 1.3 per cent, to end the session at 64,572 — the lowest closing level since June 28 and the steepest one-day fall since July 21. The Nifty, on the other hand, dropped 261 points, or 1.3 per cent, to settle at 19,282 — the lowest close since August 31 and the biggest fall since March 13.
The combined market capitalisation of the BSE-listed companies declined by Rs 7.5 trillion, the biggest erosion of investor wealth since December 23 last year, to hit Rs 311 trillion on Monday.
The fall was steeper in the mid and smallcap indices. The Nifty Midcap100 declined 2.7 per cent, while the Nifty Smallcap100 dropped 3.6 per cent – the biggest one-day fall for both indices since September 12.
The 10-year US bond yield rose up to 5.01 per cent on Monday, the highest level since July 18, 2007, triggering risk-off trades. Bond yields have been rising since the US Federal Reserve indicated, in its September meeting, that it was expecting a slower path to rate cuts. The US macroeconomic data in recent weeks reaffirmed the economy’s resilience and strengthened expectations of interest rates remaining higher for longer.
Investors are also keeping a close eye on the Israel-Hamas war.
Also Read
“When long-period bond yields go higher, it is usually a precursor to recession. It pushes investors to risk-off trades. Given that it is a holiday on Tuesday, people are being cautious. Investors don’t want to go either long or short,” Andrew Holland, chief executive officer of Avendus Capital Alternate Strategies, said. “If something favourable happens in Gaza, the markets will recover. But if the conflict escalates, you get hit,” he added.
Both domestic and foreign institutions were net buyers on Monday, but still the markets fell. “This means retail investors must have been selling in a big way. People are generally worried about the Hamas conflict escalating and its impact. Rising bond yields added to the nervousness,” said U R Bhat, co-founder of Alphaniti Fintech.
Foreign portfolio investors were net buyers to the tune of Rs 252 crore on Monday, while domestic institutional investors bought shares worth Rs 1,112 crore, according to provisional data from the exchanges.
The market breadth was weak, with 3,253 stocks declining and 593 advancing. Barring two, all the Sensex stocks declined. HDFC Bank fell 1.1 per cent and contributed the most to the Sensex loss, followed by Reliance Industries, which fell 1.6 per cent.
Going forward, the quarterly results and macroeconomic data from the US and Eurozone will determine the market trajectory.
“Even the earnings season has been mixed so far, thus not providing resilience to the market. We expect the market to remain volatile amid a rise in global uncertainties, while the stock-specific action is likely to continue amid the busy results season. Investors are advised to shift focus towards large-caps, where valuations are comparatively comfortable,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.