Earnings yield of Sensex cos only 110 bps higher than same on US govt bond

A persistence rise in yields on the 10-year government bond in the US and India over the last 12 months was steadily turning the risk-reward ratio against Indian equities, making a market correction inevitable, according to analysts.

At their current levels, Sensex companies, on average, offer earnings yield of 4.3 per cent, just 110 basis points higher than the current yield on 10-year US government bond — the world’s most popular and liquid risk-free asset class. The spread is lowest in eight years and nearly half of the 20-year average spread of 212 basis points. 

This, the analysts say, has