Sensex, Nifty tank most in nine months; will bond yields continue to push domestic markets lower?

Domestic equity benchmarks witnessed a sharp sell-off on Friday, following a pointed fall in global peers as bond yields rose. S&P BSE Sensex plunged as much as 2,100 points and ended 1,940 points lower at 49,099. Nifty 50 gave up 14,500 during the day and ended at 14,529 points. The volatility index or the fear gauge of domestic stock markets surged to an eight-month high as it jumped nearly 23% during the day’s trade. Banking stocks were the worst hit. Bank Nifty index closed deep in red, falling 4.63%.

Deepak Jasani, Head of Retail Research, HDFC Securities –

“Indian benchmark equity indices declined the most since May last year as a sell-off in bond markets across the globe sparked a collapse in global equities. Global stocks fell on Friday, with Asian shares down the most in nine months, as a fall in global bond markets sent yields flying and alarmed investors amid fears the heavy losses suffered could trigger distressed selling in other assets. Yields on the US 10-year Treasury note eased back to 1.494% from a one-year high of 1.614%, but were still up a startling 40 basis points for the month in the biggest move since 2016. Now the Nifty could head towards 14281-14336 band over the next few days with some intermittent bounces. Advance decline ratio keeps tracking the Nifty suggesting that the investors are taking action on the broader stocks based on the Nifty moves.”

Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities –

“From the recent peak, the Nifty-50 has lost 5% whereas the Mid Cap and Small Cap space has seen lesser fall. Going forward the 50 DMA of Nifty-50 which works to14,447 could be crucial support after which the next big support levels could be the ~13,600. Nifty Bank Index which is currently ~35,100 levels has major support at its previous top breakout of 32,000. What we are seeing in Indian markets is a knee jerk reaction to the rise in global bond yields. Stable currency, strong economic growth and a sharp rise in earnings could help India sustain any global correction due to inflation and rising bond yields.”

Vinod Nair, Head of Research at Geojit Financial Services-

“Domestic markets tumbled in line with global trend triggered by a sharp rise in bond yields. Increasing geopolitical tension between the US and Syria aggravated the selling. Q3 GDP data which is to be released today also added volatility in the Indian market. Although negative, mid and small caps outperformed their larger indices showing investor confidence.  The market will gain momentum as the global market is expected to stabilize supported by maintaining accommodative monetary policy and a growing economy.”

Devang Mehta,  Head Equity Advisory, Centrum Broking –

“The bond market is expecting the likely rise in inflation to push the US Federal Reserve to either lower monthly bond-buying or hike interest rates, an adverse factor for markets like India, which have been a major recipient of foreign inflows of late. Indian markets have seen a stellar rally in the past couple of months due to strong foreign flows, improving macros & return of corporate earnings growth. The ingredients of a structural bull market remain intact for India. Such ebbs & corrections will provide opportunities for long-term investors to take advantage of volatility and accumulate quality businesses at reasonable valuations & price points.”

Nagaraj Shetti, Technical Research Analyst, HDFC Securities

“The recent upside bounce of the last two sessions has been negated sharply on Friday and the short term trend has turned down. One may expect further slide down towards the next crucial supports of around 14350-14300 levels in the coming few sessions, before showing any possibility of an upside bounce. Upside rise from here could find stiff resistance at 14640.”