Bond prices rallied the most in over 18 months following a drop in crude oil prices and US treasury yields amid apprehensions that the global economic growth would moderate because of rising Covid-19 cases in China and interest rate hikes in the US.
Yields — which are inversely related to prices — on the benchmark 10-year bond slumped to 7.04 per cent against the previous finish of 7.17 per cent.
Observers said if the trend in crude oil prices continued, the benchmark yield may even fall below the 7-per-cent mark, offering a reprieve to the government which is set to borrow a record amount in this financial year.
After the announcement of the monetary policy statement on April 8, yields had climbed to almost 7.29 per cent on April 13 as the Reserve Bank of India (RBI) hiked the inflation forecast for this fiscal and there were apprehensions that it could raise rates at least 75 basis points beginning June. Before the policy announcement, the yields were trading below the 7 per cent mark.
Factors such as falling crude oil prices and the possibility of more Covid-19 induced lockdowns in China coupled with reports of Reliance Industries and Larsen & Toubro purchasing government bonds have seen yields softening since April 13.
Brent crude was trading at around $100.69 a barrel, a fall of nearly 5.50 per cent from the previous close, after briefly even going below the $100 per barrel mark.
This was after reports that Beijing has began mass testing of residents following a surge in Covid-19 cases leading to fears the capital could also face a lockdown like financial hub Shanghai.
Apart from the China factor, worries of a sharper interest rate hike by the US Federal Reserve would affect global growth are keeping the markets on the edge.
On Monday, the 10-year US treasury note was trading at 2.78 per cent against the previous close of almost 2.90 per cent.
Stock slump
The fear of more lockdowns in China and interest rate increases by the US Fed, however, hurt sentiment at the stock exchanges with the Sensex slumping over 617 points.
The benchmark index has thus sunk almost 1332 points in the last two sessions following hawkish comments by the US Fed chair Jerome Powell, rising Covid-19 cases in China and the spectre of firm inflation globally.
Further, lacklustre Q4 results by corporate India so far has dented investor participation in stocks.
The rupee declined 22 paise to close at 76.64 against the dollar on Monday, tracking a strong greenback overseas and a lacklustre trend in the domestic equity markets. Heavy forex outflows amid growing worries over global growth weighed on the local units, traders said.
The Sensex opened at 56757.64 and crashed more than 840 points to hit a day’s low of 56356.87. It later settled at 56579.89, showing a drop of 617.26 points or 1.08 per cent. The fall would have been worse had it not been for gains in the HDFC twins and ICICI Bank.
Tata Steel led the losers list by falling 4.47 per cent. it was followed by Tech Mahindra, NTPC, Sun Pharma and others which declined up to 2.76 per cent.
