Stocks and bonds forked out in opposite directions on Monday — while the stock market was buoyant over TCS, Infosys and Wipro all coming out with their results on Wednesday, bond investors sulked over rising yields in the US and the RBI continuing to sell bonds in the market.
While the benchmark Sensex rallied almost 651 points on Monday, the 10-year government security climbed to a new two-year peak of 6.59 per cent up from 6.54 per cent.
Bond yields — inversely related to their prices — have been inching up over the past few weeks because of multiple reasons including a rise in crude oil prices and fears of higher inflation.
Besides, rising US bond yields have been pushing up yields in India amid lack of any active support from the RBI and fears of higher bond supply with the government stepping up expenditure because of the third wave.
The US 10-year treasury was trading at 1.80 per cent, up from the previous close of 1.77 per cent, ahead of a US Senate testimony by Federal Reserve chairman Jerome Powell on Tuesday and December inflation data the following day
The RBI, which has been mopping up liquidity through its variable rate reverse repo auctions (VRRR), is also selling bonds in the secondary market. At an auction held on January 7 of the 2026 paper, nearly Rs 4,388 crore devolved on primary dealers as participants demanded higher yields.
The bond markets is watching the retail inflation data for December to be announced on Wednesday. A Reuters poll expects the headline number to hit a six month high of 5.80 per cent against 4.9 per cent in November.
However, the fall in G-sec prices did not have any impact on equities which were on a firmer ground. Investors accumulated IT and financial stocks ahead of the tech trio disclosing their numbers on Wednesday. The IT companies are expected to report good numbers in an otherwise lean third quarter.
They are also projected to give a positive guidance for this year. Analysts said investors have been purchasing banking stocks as they are available at attractive levels.