Indian Equities Slump Amid Higher US Yields and Crude Prices
Indian equities suffered a decline of around 1% this week due to higher US Treasury yields, elevated crude prices, and foreign selling. The Sensex and Nifty 50 ended the week at 76,515.43 and 23,897.70, respectively.
The 10-year US Treasury yield rose above 4.8% amid expectations of higher US inflation and a potential rate hike at this month's Federal Open Market Committee meeting. This triggered heavy foreign selling in the first half of the week.
Markets recovered on Friday after Fed governor Christopher Waller indicated he would support keeping interest rates unchanged at the next policy meeting, but the initial optimism faded as investors remained cautious.
The auto sector was particularly hard hit, with consumer-focused sectors such as automobiles, consumer durables, and consumer discretionary losing value. Valuations across the sector seem to have moved ahead of fundamentals after a strong period of growth, according to Ashwini Shami, smallcase and chief portfolio manager at OmniScience Capital.
Oil & gas and realty emerged as top gainers, albeit with modest gains of 0.8% and 0.2%, respectively. The rotation into these sectors could be tactical, since they offer limited long-term earnings visibility, noted Shami.