Bears Return with High Bond Yield

Our Analysis

The bears made a comeback on Dalal Street, reminding investors of last week's drubbing, as concerns over spike in bond yields rekindled. The US bond yields which have become influential on stock prices, globally, spiked to 1.48 per cent, while in India, the yield on 10-year benchmark government bonds rose to 6.26 per cent today, its highest level since April 2020.

On the global front, European shares paused as investors sought to guess the bond market's next move, while weak German retail sales were a stark reminder of continued Covid-19 fallout on the region's biggest economy. Moreover, falls in Asian stock markets, after a senior Chinese official expressed wariness about the risk of asset bubbles in foreign markets, and a drop in oil prices also weighed on sentiment.

This Weeks Market Highlights:

Benchmark Indices:

1) On Monday, Sensex settled at 49,850 levels, up 750 points or 1.5 per cent. Nifty index closed above the 14,750-mark on the back of 232 points, or 1.6 per cent, gains.

2) On Tuesday, Sensex traded in a range of 600 points and hit an intra-day high and low of 50,425 and 49,807, respectively. Nifty settled above the 14,900-mark, at 14,919 levels. The index was up 157 points or 1.07 per cent from Monday's close.

3) On Wednesday, Sensex touched a high of 51,540 during the day but retreated to end at 51,445 levels, up 1,148 points or 2.28 per cent. Nifty index made a dash for 15,300-mark in the intra-day trade, and hit a high of 15,273. The index cooled-off marginally and settled at 15,246 levels, up 326 points or 2.19 per cent.

4) On Thursday, Sensex settled the day at 50,846 levels, down 598 points or 1.16 per cent. The Nifty, meanwhile, defended the 15,000-mark and closed at 15,081 levels, down 165 points or 1.08 per cent.

5) On Friday, Sensex ended at 50,405 levels today, erasing 441 points or 0.87 per cent. From the day's high of 50,886, the index tumbled 726 points to hit a low of 50,160. Nifty settled above the 14,900-mark at 14,938, down 143 points or 0.95 per cent. 38 of the 50 stocks declined on the Nifty today, while 12 advanced.

Broader Index & Global Market:

- Domestic markets along with its global peers mirrored the wounded trend of the US market. The surge in US bond yields added selling pressure in technology stocks, forced Wall Street to close lower. Blue-chips were much affected by the weak global cues, but Mid & Small caps with its increased investor confidence retained its positive momentum.

- A late rally in Chinese shares helped pull Asian stocks off one-month lows as investors picked bargains while attention shifted to US non-farm payrolls due later in the day. Australian stocks dropped more than 0.7 per cent, Japan's Nikkei share average shed 0.2 per cent, and shares in South Korea fell 0.4 per cent. Chinese shares, which had opened in the red, reversed losses with the bluechip CSI300 index up 0.3 per cent. That left MSCI's broadest index of Asia-Pacific shares outside of Japan down 0.4 per cent.

Movers & Shakers

Shares of RailTel Corporation of India (RailTel) was locked in the 20 per cent upper circuit band at Rs 146 in the intra-day trade on Monday after the institutional investors bought a stake in the company via open market on its debut day on Friday.

Shares of Tata Motors ended at Rs 325 after sliding 8 per cent in the week over profit booking along with news of weak JLR sales in the UK.

Key Market Drivers

• Coronavirus vaccine
• Lockdown
• Q3FY21
• USA bond yield

Event Watch

International:

• Coronavirus vaccine
• USA inflation rate
• China export import, inflation rate
• Japan, UK GDP

Domestic:

• Coronavirus- vaccine
• Q3FY21
• India inflation rate
• India industrial production

Stocks To Watch

GAIL Ltd On Upside while, UPL Ltd on Downside.