Making sense of the panic on Dalal Street
What is ailing the stock market these days?
One of the biggest reasons for the drop in Sensex and Nifty is the selling by foreign institutions, which have pulled a significant ₹1.8 lakh crore out of equities since early October. The reasons for this are a deadly mix of the dollar rising, surging US bond yields, concerns over domestic slowdown and rich share valuations.
Which of these factors have had a bigger impact on foreigners' investment decisions here?
Given that India attracts a wide range of foreign investors who are betting on the country's stocks for different reasons and timeframes, it may not be a good idea to paint all flows with the same brush. For a lot of the short-term hot money flowing in from the US, the sharp rise in the bond yields and the dollar are big concerns, while long-term investors are more worried about growth and valuations.
What is the hue and cry about US bond yields and the dollar?
The yields on the US Treasury, which have risen sharply due to interest rate increases by the US Federal Reserve, have resumed their up-move following the election of Donald Trump as the next US President. The pace of the advance in bond yields has quickened ahead of Trump assuming office on January 20, seen as an advance pushback by bond vigilantes against the new government's borrowing and spending plans. Concerns that Trump would continue to spend more to stimulate the already-strong US economy by spending more and the likely tariffs on trade partners would boost inflation further are boosting bond
