Domestic markets recorded a two-day bullish streak after 5-year US Treasury yields rose above 3% following comments by US Federal Reserve Chairman Jerome Powell that a 50-year rate hike basis points could be considered in May.
The benchmark Sensex lost 714 points, or 1.2%, to end at 57,197. The Nifty ended at 17,172, down 220 points, or 1.2%. After an intensely volatile week, the Sensex and Nifty ended the week down 2% and 1.7%, respectively.
The yield on the 5-year Treasury note rose 2 basis points to 3.003%, the 10-year Treasury note rose 1.5 basis points to 2.932% and the 30-year note was at 2.949%. Experts said the “inverted yield curve” – with yields on short-term bonds higher than those on long-term bonds – was a sign of a lack of confidence in growth prospects.
Powell spoke at an International Monetary Fund (IMF) panel Thursday in Washington that he shared with European Central Bank President Christine Lagarde. The US Fed chief also hinted at another half-point hike in June, citing minutes from last month’s policy meeting. Powell said many officials had noted that “one or more” 50 basis point hikes might be appropriate to rein in the highest inflation in four decades.
“The prospect of even faster and more aggressive rate hikes, and if the Fed can pull off a soft landing, was enough to reverse equity markets sharply, sending them to a significantly lower finish,” said analyst Jeffrey Halley. main markets, Asia-Pacific, Oanda.
European markets also witnessed a sell-off amid signals from the ECB of monetary policy tightening and mixed corporate earnings. Investors are also bracing for the second round of the French presidential election on Sunday, where President Emmanuel Macron will face Marine Le Pen.
Foreign Portfolio Investors (REITs) sold shares worth Rs 2,462 crore on Friday. “The Fed’s hawkish comments, rising inflation and bond yields, slowing economic growth, protracted war in Ukraine and volatile crude prices are keeping markets uncertain. FPI and weak results from a few heavyweights have further increased the pressure on the market.The index is likely to remain volatile,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.
The uncertain global environment should also weigh on the performance of the national economy. UBS Securities on Friday lowered India’s gross domestic product (GDP) growth forecast for the current fiscal year from 7.7% to 7%.
All but six Sensex voters finished the session with losses. Infosys fell 2.03% and contributed the most to Sensex’s fall. Market breadth was weak, with 2,030 stocks down and 1,382 up on BSE. Banking stocks fell the most and its BSE sector index fell 2.2%. On a weekly basis, with the exception of Nifty Auto and Energy, all sector indices closed lower.