December 30, Reuters Bank stocks were the main cause of Monday’s decline in India’s benchmark indexes as rising U.S. Treasury yields and the possibility of fewer rate cuts in the United States continued to pressure emerging markets.Of the thirteen key sectors, ten fell. High-weighted financials ended a two-session winning streak with a 1% loss.The two most heavily weighted companies in the benchmark indices, HDFC Bank and Reliance Industries, an oil-to-telecom behemoth, both saw daily losses of roughly 1%.The Effect of Rising US Treasury YieldsThis is causing a flight of money from emerging nations, particularly India, where investors are more sensitive to global interest rate changes,” said Rajeev Agarwal, a senior market analyst at a major financial advisory firm. In addition to Asia, high Treasury yields have put pressure on the stock markets in the US and Europe. Prior to the release of monthly sales figures later this week, domestic car stocks fell 1.4%.A plan to acquire renewable power producer O2 Power Midco Holdings caused JSW Energy to rise 2.8%, defying the trend.Banking Stocks bear the bruntThree analysts predict that the union budget in early February and corporate earnings beginning next week will determine the direction of Indian markets in the near future.Slowing corporate results and a flight of foreign investors reduced the Nifty 50 and Sensex’s year returns to roughly 8.5%, the lowest among their major international rivals, and even sent stocks into correction territory after they soared to record highs in the first few months of 2024.Escorts Kubota, a manufacturer of tractors, saw a 2% decline in its stock price the day after revealing a decline in December sales.Following their respective contract wins, SJVN and Kalpataru Projects International saw increases of roughly 3% and 2.4%, respectively.Investor Sentiment and Market OutlookAs of 9:35 a.m. IST, the BSE Sensex was down 0.09% at 78,057.81, while the Nifty 50 had dropped 0.11% at 23,617.75 points.With the cars index down 0.4%, ten of the 13 major sectors had losses.The two-wheeler manufacturer reported a decline in vehicle sales in December, which caused Bajaj Auto shares drop 2%, the most on the auto and Nifty 50 indices.Smallcaps and midcaps that were more broadly focused on domestic markets were flat.With the MSCI Asia ex-Japan index down 0.1%, other Asian markets were likewise subdued as rising U.S. Treasury yields continue to pressure emerging economies.Sunil K. Gupta, Chief Economist at India Ratings and Research, said that high US yields area big risk factor and are causing market instability.While India’s domestic economic indicators, such as GDP growth, inflation control, and corporate earnings, remain good, global headwinds in the shape of high US yields and impending RBI tightening may erode investor confidence.Are There Any Silver Linings?Before settling close to the day’s low, they fluctuated between gains of 0.4% and losses of 0.8%.”While the short-term picture is uncertain due to global issues, India’s economic fundamentals remain robust. “The correction we are seeing could be a good entry point for long-term investors looking to capitalize on India’s growth story,” said Ramesh Bhat, Head of Research at a well-known brokerage firm. Analysts also highlight the durability of industries that are less subject to global interest rate changes, such as technology and consumer products. As global markets react to the new reality of higher US yields, India’s strong domestic consumption narrative may serve as a buffer against financial market turbulence.ConclusionThe Indian stock market is clearly encountering issues as US Treasury yields climb, affecting capital flows. Banks in particular are feeling the strain as higher returns impact their profitability. Experts, however, believe that this correction is only transitory and that India’s long-term economic story would continue. Investors are encouraged to remain watchful and review their portfolios as they navigate the volatile market circumstances.
By Girisha Devaraj
Reporting for, TRUE TO LIFE News Media