Indices fall for 3rd day on rising bond yields; Sensex ends 231 pts lower

Benchmark indices on Friday fell for a third day as rising bond yields, surge in oil prices and escalating tensions in West Asia weighed on the risk appetite.

The Nifty 50 index fell 82 points, or 0.42 per cent, to close at 19,543, while the Sensex ended at 65,398, a decline of 231 points, or 0.35 per cent.

The Sensex and Nifty declined 1.3 per cent and 1.1 per cent during the week.

Worries about the West Asia conflict escalating further rose after the US said military bases in Iraq and Syria had been attacked. Reports suggest that a US destroyer shot down missiles launched by Houthi militants towards Israel.

Analysts said crude is prone to further hikes as the conflict shows no signs of easing. Brent crude was trading over $94 per barrel on Friday.

Rising oil prices are considered a negative for Indian equities as India imports more than three-fourths of its oil requirements.

Meanwhile, the rise in 10-year bond yields topped 5 per cent for the first time since July 20, 2007.

This comes amid comments by the US Federal Reserve Chair Jerome Powell that inflation is too high and may lower economic growth.

The bond yield moderated a bit and was trading at 4.94 per cent.

On Thursday, Powell had said that strength in the US economy and tighter labour situation warrant tougher borrowing conditions. However, Powell added that rising market interest rates could make action by the central bank itself less necessary.

The Fed chief's comments are in line with those of other US monetary policymakers, who have said that rising bond yields would ease the pressure of further hikes.

“The added uncertainty stemming from West Asia tensions and the imperative for continued monetary tightening emphasized by the US Fed Chair created a layer of volatility. Furthermore, the varied results of blue-chip companies, influenced by subdued global and domestic demand, are steering the market towards a consolidation trajectory in the near term,” said Vinod Nair, head of research at Geojit Financial Services.

Quarterly results and the geopolitical situation in West Asia will give further cues to the market next week.

“We expect the earnings season to pick up pace in a truncated week, which would direct the market trend along with global cues. The banking sector will be in focus on Monday as investors react to two major private bank results that would be announced over the weekend,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

The market breadth was weak, with 2,402 stocks declining and 1,312 rising. Two-thirds of Sensex stocks declined.

Fast-moving consumer goods (FMCG) majors ITC and Hindustan Unilever fell 2.7 per cent and 2.1 per cent, respectively, accounting for over half the Sensex losses. The losses came on the back of disappointing results. Oil and gas stocks declined the most, and the sectoral index on BSE fell 1.7 per cent.