The Nifty fell 568 points to close at 14,529.15 and the Sensex racked up 1939 points to finish at 49,099.99. Most Asian stock indices fell 2-4%, reflecting the overnight sell-off on Wall Street.
Foreign portfolio investors sold Indian stocks worth Rs 8,295.17 crore on Friday and domestic institutional investors bought Indian stocks worth Rs 1,500 crore.
This was a sharp turnaround for equities, which have for the most part maintained their bullish momentum so far in 2021 despite recent booms in rich stock valuations.
Concerns about strengthening yields in the world’s largest bond market have loomed over global equities for the past two weeks, keeping investors on the lookout. What drove them was the surge in US yields to an annual high of 1.6%, fueled by mounting inflationary concerns amid bets on faster economic growth. Investors have said that the US Federal Reserve may not be able to maintain easy monetary policy for too long if inflation rises.
“The US economy is far too leveraged and weak at the moment to cope with surging yields,” said Jan Dehn, research director at Ashmore Group, a UK investment manager. “There is every reason to be positive for emerging markets and Indian equities over the next 12 months.”
Sensex, Nifty up 2.9% in ’21
“Investors should ruthlessly exploit any pullback caused by the movement of Treasuries to return to more attractive levels,” he said.
Sensex and Nifty are up around 2.9% so far in 2021, after Friday’s sell-off erased much of the gains. Foreigners have been investing funds in Indian stocks since March 23 last year, as gigantic stimuli from the US central bank and government to save the economy hit by Covid-19 led to the weakening of the dollar and stimulated appetite for riskier emerging markets. The packages raised expectations of a faster-than-expected recovery and inflation, too, scaring financial markets.
“Caution should prevail as the market has technically been overbought for months and US bond yields are rising, which could put upward pressure on the dollar and impact flows,” said Piyush Garg, CIO of ICICI Securities. “Rising oil prices are also not good for India’s macroeconomic situation.”
