Spike in yield spooks equity investors; bank, financial cos stocks fall

State-owned banks such as Bank of Baroda and Allahabad Bank also declined 4%

Shares of banks and financial companies tumbled after the yield on the new 10-year benchmark government security jumped 11 basis points (bps) to 7.38 per cent. Yields have hardened by over 27 bps since January 5 when trading began on the new bonds. Surge in yields will increase the cost of credit for financial companies, eroding their margins. 

Non-banking financial companies such as Bajaj Finance and Manappuram Finance saw their stock prices fall by around four per cent each. State-owned REC and PFC also fell four per cent and three per cent, respectively. State-owned banks such as Bank of Baroda and Allahabad Bank also declined four per cent.