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 declined 4 per cent for the first time in four months, raising fears that interest rates would remain high for a longer period. The BSE Sensex ended the session at 58,909, down 502 points or 0.8 per cent, while the Nifty 50 ended the session at 17,322, down 129 points or 0.7 per cent.

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

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

Analysts said investors are now trying to predict how higher interest rates in the US and Europe will play out.

Investors are now betting that the ECB will raise interest rates to 4 percent by the end of February 2024, compared to 3.5 percent expected at the start of the year.

Aggressive comments by Fed officials to keep rates from rising have fueled investor concern. Atlanta Federal Reserve President Raphael Bostic said on Wednesday that he was in favor of keeping rates above 5 percent to prevent inflation from rising again. Biostik said in an essay that the Fed needs to raise rates between 5 and 5.25 percent and leave it there until 2024 to bring aggregate supply and aggregate demand into better balance and thus reduce inflation.

The Fed raised rates by 25 bps in early February, taking the interest rate to between 4.5 and 4.75 percent. At its December meeting, the Fed raised rates by 50 bps, which was preceded by four 75 bps hikes.

Some investors are now becoming concerned that China’s reopening will lead to higher inflation.

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

Shares of Adani Transmission gained 5 per cent, Adani Green Energy 4.99 per cent, Adani Wilmar 4.99 per cent and Adani Power 4.98 per cent.

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

Shares of Adani Ports gained 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.


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