Rising yields halt benchmarks' winning streak; Sensex falls 487 points

The Nifty ended Friday's session at 15,031, a fall of 144 points or 0.95 per cent

Indian benchmark equity indices broke their three-day winning streak on Friday after a fresh bout of bond volatility rattled the equity markets.

After opening higher, the indices fell before recovering some losses in the last hour of trade.

The benchmark Sensex ended the session at 50,792, a decline of 487 points or 0.95 per cent. The Nifty, on the other hand, ended Friday’s session at 15,031, a fall of 144 points or 0.95 per cent.

Bond yields rose, hitting US stock futures, after US President Joe Biden said the country aims to make vaccination available to every adult by the start of May. Biden further set July 4 — when the US celebrates its Independence Day — as the new target for a return to normality.

On Thursday, Biden signed a $1.9 trillion American rescue plan, which is expected to provide a significant boost to the US economy.

In the last few weeks, bond markets have been volatile amid concerns that a swift US economic recovery would increase inflation.

Investors are worried that the US government’s fiscal stimulus and return to normalcy could stimulate the economy quickly and lead to a surge in prices.

Inflation decreases the value of bond’s interest payment. The lower-than-expected jobless claims in the US was another factor that led to the rise in bond yields.

Bond yields and stocks have an inverse correlation, and rising bond yields lead to fall in equities.

The yield on 10-year US Treasuries was up sharply, trading at 1.6 per cent on Friday and hit a 13-month high from around 1.54 per cent on Thursday, as investors sold the debt.

Bond yields have been rising for the sixth consecutive week.

“Hardening bond yields and soaring oil prices are expected to weigh on investor sentiments and may keep markets volatile in the near to medium term. Rising bond yields are discounting faster growth prospects of the economy. Given the persistent dovish stance of global central bankers and likely improvement in supply-side bottlenecks in the US, bond yields are unlikely to move northwards beyond a point,” said Binod Modi, head of strategy at Reliance Securities.

Analysts said investors will now focus on the US Federal Reserve’s announcements next week, as well as the macroeconomic data points in India.

“Markets will react to IIP and CPI inflation data points on Monday. Also, global cues and Covid-related updates will be taken into account. We reiterate our cautious view on markets until we see either side’s decisive break in Nifty,” said Ajit Mishra, vice-president of research at Religare Broking.

On an overall basis, 243 stocks hit their 52-week highs, and 355 hit the upper circuit.