Changing course: Nifty's valuation edge erodes as US Treasury yields surge

Historically, there is a negative correlation between US 10Y treasury bond yield and Nifty 50 valuation

A recent surge in US bond yields, combined with lacklustre corporate earnings in the March 2025 quarter, is weighing on Indian equity valuations and could pressure stock prices further. The earnings yield on the Nifty 50 benchmark index has fallen 64 basis points since the end of February, while the yield on 10-year US Treasury bonds has risen 27 basis points over the same period. 

As a result, the yield spread — the difference between India’s equity earnings yield and the US risk-free rate — has turned negative for foreign investors, slipping to -18 basis points from a 21-month high