Foreign portfolio investors are selling Indian stocks, lured by high US treasury yields that sent the Sensex tumbling by 633 points intra-day before the bellwether index regained ground by the close of trading on Wednesday.
An unrelenting selloff in world government bonds drove US 30-year treasury yields to 5 per cent for the first time since 2007 and German 10-year yields to 3 per cent on Wednesday in moves that could hasten a global slowdown, hurting stocks and corporate bonds.
A growing sense that interest rates in major economies will stay higher for longer to contain inflation has hit home.
“Overseas investors are pulling out funds from the Indian equity markets as the current rally in US dollar and bond yields is making emerging market assets less attractive,” Shrikant Chouhan, head of research (retail), Kotak Securities Ltd, said.
“Despite our strong macroeconomic growth performance, India is not insulated from global problems, and hence any correction in global markets due to worries over further rate hikes would have a rub-off effect here,” he said.
In the US Treasury market — considered the bedrock of the global financial system — 10-year yields have jumped 20 basis points (bps) to 4.8 per cent this week alone. They are up almost 100 bps this year, having jumped over 200 bps in 2022.
However, US yields fell to 4.78 per cent provided some relief to Indian stocks.
After falling to a day’s low of 64878.77, the 30-share Sensex ended at 65226.04, showing a loss of 286.06 points. On the NSE, the Nifty declined 92.65 points, or 0.47 per cent, to end at 19436.10.
FPIs have been on a selling spree since August, with provisional data showing them net sellers of Rs 4,424 crore in Wednesday.
After sustained buying earlier in the year, FPIs have pulled out of over Rs 14,767 crore from Indian equities in September, primarily due to dollar appreciation and a steady rise in the US bond yields. They have sold Rs 3,704 crore equities in October.