Indices slip after US 10-year yield spikes; Sensex falls 482 points

The benchmark indices declined on Monday amidst weak global cues due to a sharp spike in the US Treasury yields. Investors also turned cautious ahead of the start of the results season. The benchmark Sensex fell 482 points to end the session at 58,964, a decline of 0.8 per cent. The Nifty, on the other hand, ended the session at 17,675, a decline of 109 points or 0.6 per cent.

The US 10-year bond yield traded above 2.75 per cent. Yields have shot up close to 100 basis points in the past one month due to concerns over rising inflation and the Federal Reserve’s plans to aggressively tighten monetary policy. India's 10-year yield hit a three year high and was trading at 7.15 per cent.

Rising bond yields are considered to be negative for the equity markets, at least in the near-term.

Asian markets fell as China grappled with a Covid-19 outbreak and regulatory concerns in the technology sector. Brent crude was trading around $100 per barrel, having lost 15 per cent, in the past fortnight on concerns over economic slowdown in China as the world's second-largest economy tries to control the spread of Covid-19. The outbreak in China has also brought back fears that the supply chain disruptions will become more severe and inflation will rise. "The risk of pickup in inflation and rise in Covid-19 cases in some parts of the world continue to shape market moves. The domestic market has been stuck in a range of 250 points over the last couple of sessions. Nifty is not being able to hold on to its recovery and is witnessing selling at every bounce,' said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services.

Investors will be keenly watching quarterly earnings reports this month. "Markets will react to Tata Consultancy Services (TCS) numbers on Tuesday. Besides, cues from the global markets will also be in focus. Participants should continue with a cautious approach and stick with the stock-specific trading approach,' said Ajit Mishra, VP, research, Religare Broking.

Many central bank rate decisions, including that of the European Central Bank (ECB) and US consumer price data, are also likely to determine the market's trajectory. “The market is wary ahead of the ECB meeting and the release of US inflation data. The Indian IT sector also dragged due to weak result expectations on a quarter-on-quarter (QoQ) basis. In this shortened week, the market is cautious as trading at the upper side of the trend and momentum has shifted from broad based to stock-specific," said Vinod Nair, head of research, Geojit Financial Services.

The market breadth was mixed, with 2,048 stocks advancing and 1,515 declining. "Advance-decline ratio remains positive, signifying pressure of foreign portfolio investors (FPI) selling in large-caps," said Deepak Jasani, head of retail research, HDFC Securities.