After The Bell: Rise in US bond yields spook market; what should investors do on Friday?

Market Outlook

Dovish commentary from the US Federal Reserve led to strong gains in the opening session on D-Street on March 18 before the spike in US bond yields let bears take control.

The US 10-year treasury yields rose to 1.74 percent, their highest since January 2020.

Back home, five consecutive days of fall could put anyone in doubt about a bull market that had pushed Sensex beyond 52,000 and Nifty 50 above 15,400 levels just last month.

The relentless selling pressure on highs dragged Sensex below 50,000 while the Nifty 50 breached crucial support near 50-DMA, and 50-Days EMA on Thursday.

Let’s look at the final tally on D-Street – the S&P BSE Sensex fell 585 points to 49,216 while the Nifty50 closed 163 points lower at 14,557.

The selloff was more prominent in the broader market space. The S&P BSE Mid-cap index fell 1.3 percent while the S&P BSE Small-cap index was down 1.58 percent.

“Indian equities pared its early optimism and fell into a sharp correction as US bond yield rose to their highest level since January. Dovish comments from the Fed chief on the strong economic bounce back and continuation of its accommodative stance, could not weigh down the rally in the US bond market,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

“Indian markets had witnessed higher volatility compared to its global peers as domestic investors turned extra cautious on increasing COVID cases in India and a fall in FII inflows,” he said.

Here is what experts are suggesting investors should do on March 19:

Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services Limited

The Nifty50 formed a strong Bearish candle on a daily scale and continued its weakness for the fifth consecutive session with the formation of lower highs from the last four trading sessions.

Now, till it remains below the 14700 zone weakness could be seen towards 14450 and 14300 zones while on the upside hurdles shift lower to 14800 and 14900 zones.

Gaurav Garg, Head of Research at CapitalVia Global Research Limited

Policymakers have confirmed that there will be no hike in the rates and that has come as positive news for the markets globally. The market couldn’t sustain the higher levels due to the looming threats around the uncertainty about the lockdown.

Asian markets have also been turned negative after the initial positivity in the market. Global sentiments continue to be positive and we can expect a reversal in the next week.

As of now, the short-term technical condition to be in the range of 14410-14900. All major indices are trading in the red where Hindalco and Bajaj Auto are the top gainers while Infosys and HCL Tech being the top losers on Nifty.

Ashis Biswas, Head of Technical Research at CapitalVia Global Research Limited.

The market failed to show resilience to stay above the level of 14750. As of now, the short-term technical condition of the market shows that the expected range of the market is likely to be between 14410 and 14900.

While it is subject to further price action evolution, it is prudent to wait for volatility to subdue and technical factors to improve before attempting to build short to medium-term investments.

We retain our cautious stance until further improvement and breakout is seen above 14900.

S Ranganathan, Head of Research at LKP Securities.

With the US 10-year yield hitting its highest level in over a year, bears held the upper hand on Thursday even as the FED kept rates unchanged.

Selling in Financials kept markets in the red with broader markets seeing profit booking in IT & Pharma stocks ahead of the FTSE rebalancing on Friday.

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