Monday Blues: US Bond yields top 5%, scare off Dalal St bulls
Indian stocks plummeted Monday late afternoon after a circumspect start to the week, with yields on 10-year US treasuries breaching the 5% threshold for the first time since the Global Financial Crisis and stoking concerns that the persistent rise in global risk-free rates will further elevate the risk premium on emerging market assets. Mid- and small-cap shares, falling in the higher risk-reward matrix, were hammered with more than 80% of the BSE-listed universe ending deep in the red.
«The markets were awaiting a correction and the US bond yields touching 5% brought about that trigger,» said Nischal Maheshwari, CEO-Institutional Equities, Centrum Broking.
US risk-free rates were last at this level in July 2007, before Lehman Brothers had collapsed and the subprime sinkhole had swallowed a loan market anchored in complex derivatives to trigger a prolonged phase of quantitative easing by global central banks.
BSE's Sensex fell 825.74 points, or 1.26%, to close at 64,571.88.
The NSE's Nifty dropped 260.90 points, or 1.34%, to end at 19,281.75. Analysts said technical indicators are pointing to further weakness and a drop in the Nifty below 19,200-levels could lead to the index falling to 18,800.
Besides concerns over US yields that anchor debt pricing globally, the Gaza conflict raised the likelihood of an increase in fuel prices, further denting the appeal of financial assets in a large oil importer such as India.
Dow Jones Industrial Average was down 0.15% at 33,078.13.
