A sharp surge in bond yields and rising commodity prices have come back to haunt equity markets, with most analysts expecting a limited upside for the equity markets.
Today(26th Feb.2021), Asian stocks traded sharply lower after Wall Street's main indexes tumbled, with technology-related stocks under pressure following a steep rise in benchmark US Treasury yields, which hit their highest level since the pandemic began – up 14 basis points (bps) at 1.5286 percent. The surge came on the back of expectations of a strong economic expansion and related inflation.
“In line with the global trend, Indian yields have definitely bottomed out. Since the expansionary budget in February, Indian 10-year is up 28 bps to 6.18 percent despite RBI’s verbal and explicit market support. The gap between earnings yields (1/Nifty one-year forward PE) to 10-year bond yield is now at 156bps, which is 57bps higher than the long-term average,” said an expert.
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