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Domestic stock markets on Monday plunged by nearly one per cent as latest US economic data raised fears of a delay in rate cuts and prospects for a rise in bond yields again. The benchmark Sensex fell by 671 points, or 0.93 per cent, to 71,355.22 and the NSE Nifty Index lost 198 points at 21,513 ahead of the release of the inflation data in the US.
Analysts said 11 out of 13 sectors were in the red with PSU banks, FMCG and metal sectors falling the most.
“Investors fretted across Asian and European markets, as US bond yields crossed 4% again that spiralled into a large-scale correction in domestic equities. While rising valuations were beginning to raise concerns, investors resorted to profit-taking as weakness in banking, IT and oil & gas stocks saw the Sensex end below the 72000 mark,” said Prashanth Tapse, Senior VP (Research), Mehta Equities. If the US inflation rises again, bond yields will also rise and rate cut will be delayed.
“The market witnessed widespread selling as the euphoria over early rate cuts may diminish due to the better-than-expected non-farm payroll data from the US and the consequent rise in the US 10-year yield,” said Vinod Nair, Head of Research, Geojit Financial Services. US bond yield which was below 4 per cent at 3.91 per cent recently has now crossed four per cent to 4.04 per cent.
Markets were hoping that US rate cuts could start as early as March and be more extensive than the Federal Reserve has suggested. With the US payroll data coming in above expectations, markets have realised that there’s resilience and strength in the economy.
“In the near term, investors’ trade positions will be more inclined towards the upcoming result season. While there are lower expectations about the IT sector, the overall forecast for earnings growth remains optimistic, projecting double-digit figures,” Nair said.
“Markets were also reacting to reports suggesting that the interim budget to be presented on February 1 is likely to increase the tax rebate under the new personal income tax regime,” said Avdhut Bagkar, Technical and Derivatives Analyst, StoxBox.
Domestic markets ignored the National Statistical Office’s first advance estimates that projected India’s real gross domestic product (GDP) growth at 7.3% on-year for this fiscal, marginally higher than 7.2% in the previous one. “Growth estimates for this fiscal have surpassed our expectations. High frequency indicators such as the S&P Purchasing Managers’ Index show activity remaining in the expansion zone in the third quarter for both manufacturing and services,” rating agency Crisil said.
© The Indian Express Pvt Ltd
First uploaded on: 08-01-2024 at 17:16 IST
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