A rise in US bond yields and the increasing number of Covid-19 cases in the country on Thursday caused the benchmark indices to slip for the fifth consecutive session. The 30-share Sensex tumbled 585 points taking its cumulative loss to around 2063 points during this period.
The lower close came despite dovish comments from Federal Reserve chairman Jerome Powell indicating that it would continue with its current regime of near-zero interest rates at least till 2023 amid apprehensions that it could start unwinding its accommodative policies.
However, rising US bond yields played spoilsport, leading to fears that this could see outflows from emerging markets such as India. On Thursday, the 10-year US treasury yield touched almost 1.75 per cent — a 14 month high.
There were other reasons as well. The rising number of coronavirus cases in the country and apprehensions that some regions may be facing the risk of a second wave has re-ignited concerns about the resulting partial lockdowns, its adverse impact on economic activity and consequently on India’s economic growth.
In a report on Wednesday, Nomura said that the rising number of cases could lead to near-term growth concerns, though its impact would be limited over the medium term as vaccination gathers pace.
Further, with various IPOs vying for investor attention this week, this has affected inflows into the secondary markets.
“The Indian equity markets continued to grind down despite opening in the green on the back of positive global cues at the beginning of the session. The sentiments were affected by the sudden firming up of the bond yields in US along with another day of surge in new Covid cases to 38,500 — the highest in past four months in India. The clubbing of IPOs in the already tight advance tax payment season also seem to have added the underperformance by Indian markets compared with its Asian peers and European markets,’’ said Gaurav Dua, SVP, head of capital market strategy, Sharekhan by BNP Paribas.
Meanwhile, the RBI has announced a special open market operations which involved the simultaneous purchase and sale of government securities for an aggregate amount of Rs 10,000 crore on March 25. The central bank has been trying to cool down long-term yields, which have defiantly stayed around 6.20 per cent recently.