The Indian indices wavered on Wednesday as the US bond yields advanced and the dollar extended gains, triggering a flight to safety by global investors.
The Sensex fell 627 points, or 1.25 per cent, to end at 49,509, while the Nifty fell 154 points, or 1.04 per cent, to close at 14,691. A day earlier, both the indices had posted their biggest gain in nearly two months, advancing 2.3 per cent each.
Rising Covid-19 cases and fears of curbs to contain its spread weighed on investor sentiment. The meltdown at Bill Hwang’s Archegos Capital Management also kept markets nervous as more banks warned of losses.
Most global markets edged lower as investors awaited more details on the next leg of US stimulus spending. President Joe Biden was poised to unveil a large infrastructure package, aimed at rebuilding infrastructure like highways, bridges, and rail lines.
The 10-year US bond yields advanced again during Asian trading, having touched a 14-month high of 1.77 per cent before subsiding overnight. Experts said investors were eyeing the course of the US growth rebound and its possible impact on inflation, amid concerns that the surge in bond yields could hit the equities market.
Foreign portfolio investors (FPIs) sold shares worth Rs 1,689 crore, while domestic institutions bought shares worth Rs 2,081 crore.
“It’s a really challenging market right now, very volatile, very rocky. Although a lot of the economic data is improving, overseas and in the US, we are still in a very fragile place. You need to be cautious at this point,” Terri Spath, chief investment officer, Zuma Wealth told Bloomberg.
Financial stocks led the fall on Wednesday. HDFC fell 4.1 per cent, HDFC Bank fell 3.9 per cent, and ICICI Bank fell about 2 per cent. IT stocks outperformed the market for a second day as Biden was expected to allow the ban on H1B visas to expire.
The Sensex ended the month with a gain of just 0.8 per cent. After rising as much as 9.2 per cent, the blue chip company index ended the first quarter of 2021 with a gain of 3.7 per cent. Rising bond yields and resurgence in Covid has seen the market come off from its highs in mid-February.
“Steep rise in dollar index and the US bond yields increasing… all of this has led to increased volatility in domestic markets. We believe the market remains in medium term uptrend. Current momentum bottom is seen at 13,450 and resistance seen at 15,600 for the Nifty; we expect range bound activity accompanied by high volatility,” said Sahaj Agrawal, head of research – derivatives at Kotak Securities.