India bond yields to ease as cooling US inflation lifts mood
时间:2024-06-29 02:52:50 阅读(143)
Indian government bond yields are likely to ease early on Thursday, tracking a drop in U.S. peers after inflation in the world’s largest economy grew at a slower-than-expected pace calming bets of aggressive rate hikes. However, an upward move in local retail inflation may not allow any large bullish moves.
The benchmark 7.26% 2033 bond yield is expected to be in the 7.06%-7.10% range after ending the previous session at 7.1160%, a trader with a primary dealership said. “Most of the moves regarding easing inflation in the U.S. was already done on Monday and Tuesday, and with the jump in Indian inflation, any major rally may fizzle out soon at around key levels,” the trader said.
Inflation registered its smallest annual increase in more than two years, having risen 0.2% last month for an annual gain of 3.0%. In the 12 months through June, the core CPI rose 4.8%. The 10-year yield eased 12 basis points, while the two year-yield, a closer indicator of interest rate expectations, declined 15 bps on Wednesday, with the inversion in the key part of the yield curve contracting to around 85 bps from over 100 bps last week.
Back home, surging food prices accelerated India’s June retail inflation rate to 4.81%, snapping four months of easing and higher than both the revised 4.31% for May and 4.58% expected in a Reuters poll. “The recent spike in food prices may caution the RBI, but we expect it to stay on hold for an extended period, without dropping its guard on inflation,” Barclays said.
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- ack of strong growth and continued high inflation in US is a cause for concern for equity markets, given the gap between bond yields and earnings yields for the US market.”
However, he believes that the impact on the Indian market is going to be temporary since there could be some short-term impact on flows into Indian equity markets. But since the Indian economy is on a strong wicket and will continue to remain resilient.
“Improved fiscal situation, controlled current deficit, stable interest scenario combined with good corporate earnings should lead to limited impact on the Indian bond market and equity market too,” he added.
The midcap and smallcap indices took a bigger knock with the BSE MidCap fell 2.51%, while BSE SmallCap index dived 4.18%. According to Amnish Aggarwal, head, research, Prabhudas Lilladher, the valuations were already high and some correction was expected. “If the situation sustains as it is then further correction can’t be ruled out,” Aggarwal said.
Telecommunication and industrials indices were the top laggards with BSE Telecommunication declining 3.82%, followed by BSE Industrials falling 3.26%. JSW Steel (-2.99%), Tata Steel (-2.52%) and Tata Consultancy Services (-2.44%) were the top losers of Sensex.
Surprisingly, both foreign portfolio investors and domestic institutional investors were net buyers today. While, FPIs net bought shares worth Rs 252.25 crore, DIIs have purchased shares worth Rs 1,111.84 crore, as per provisional data from exchanges.
Calling this a “normal phenomena” Pankaj Pandey, head, research, ICICI Direct said, “I will not really give too much weight to a single day buying figure. Amid concerns of elevated interest rate and geopolitical tensions, in a typical market cycle, 8-10% correction is possible at any point in time.”
The brunt of geopolitical conflict, elevated interest rates and rising crude oil prices was also felt by other Asian- Pacific markets. Jakarta Composite Index lost 1.57% followed by Shanghai Composite Index and PSEi, which fell 1.47% and 0.89%, respectively. Nikkei and KOSPI declined 0.83% and 0.76%.
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