Day after breather, benchmark indices fall on rising US 10-year yield

Indian equity benchmarks declined on Thursday as the 10-year US Treasury bond hit 4 per cent for the first time in four months, stoking fears that interests will stay higher for longer. The BSE Sensex declined 502 points, or 0.8 per cent, to end the session at 58,909 while the Nifty50 ended the session at 17,322, a decline of 129 points, or 0.7 per cent.

The US 10-year yield, a key indicator for global cost of capital, advanced 40 basis points (bps) in February, with markets repricing the peak US Federal Reserve (Fed) policy rate of 5.5 per cent to 6 per cent.

Higher-than-expected inflation data from Germany and France this week also led to bets of further interest rate hikes from the European Central Bank (ECB).

Analysts said investors are now trying to gauge how high-interest rates will rise in the US and Europe.

Investors are now betting that ECB will raise interest rates to 4 per cent by the end of February 2024, against the expectation of 3.5 per cent at the beginning of the year. 

The hawkish comments by Fed officials batting to keep rate hikes elevated have added to investor worries. Atlanta Federal Reserve president Raphael Bostic said on Wednesday that he was in favour of keeping rates above 5 per cent to ensure inflation does not pick up again. Bostic, in an essay, noted that the Fed has to raise rates between 5 to 5.25 per cent and leave it there until 2024 to bring aggregate supply and aggregate demand into better balance and thus lower inflation.

The Fed had raised the rates by 25 bps at the start of February, bringing the interest rate in the range between 4.5 and 4.75 per cent. In its December meeting, the Fed had hiked rates by 50 bps which were preceded by four 75 bps hikes.

Some investors are now getting concerned that China’s reopening would add to inflation.

Also on Thursday, Adani Group firms maintained their winning run with all the ten listed entities ending in the positive territory.

Shares of Adani Transmission rallied 5 per cent, Adani Green Energy advanced 4.99 per cent, Adani Wilmar rose 4.99 per cent and Adani Power jumped 4.98 per cent.

Besides, shares of NDTV gained 4.96 per cent, Ambuja Cements (4.94 per cent) and Adani Total Gas (4.41 per cent) on the BSE.

Scrips of Adani Ports climbed 3.50 per cent, Adani Enterprises (2.69 per cent) and ACC (1.50 per cent). As a result, the cumulative market valuation of the ten companies stood at Rs 7.86 lakh crore.