Equities fall as U.S. bond yields rise on Fed stance

Sensex, Nifty drop more than 1% each

A view of the Bombay Stock Exchange building in Mumbai. File

Indian equity benchmarks dropped by more than 1% for the second straight session on Thursday on concern that rising U.S. bond yields in the wake of the Federal Reserve’s dovish policy stance could herald foreign fund outflows.

Amid widespread selling pressure, the S&P BSE Sensex slumped 585 points, or 1.17%, to close at 49,217. The NSE Nifty 50 index slid 163 points, or 1.11%, to 14,558. Both the indices fell for the fifth consecutive session.

Analysts said the rising U.S. bond yields could spur an outflow of funds.

“Equities fell into sharp correction after early optimism as U.S. bond yields rose to their highest level since January,” said Vinod Nair, head of research, Geojit Financial Services.

Mr. Nair said Indian markets saw more volatility than its global peers as domestic investors turned extra cautious on the increasing number of COVID-19 cases.

“The mounting concerns of possible fresh economic restrictions made enthusiasm of dovish commentary from the Federal Reserve short-lived for domestic markets,” Press Trust of India quoted Binod Modi, head strategy at Reliance Securities, as saying.