Fed hike, rising US yields could trigger fresh selloff in Indian stocks
The Federal Reserve's potential rate hike looms over global markets. US 10-year sovereign yields nearing five percent pose a significant challenge. This rise makes emerging markets like India less attractive for foreign investors. High risk-free rates globally affect all asset valuations and investment strategies. Indian retail investors may face increased pressure from institutional selling.
Mumbai: The Federal Reserve's decision on policy rates could lead to a fresh sell-off in Indian stocks, according to analysts. If the Fed Chair Kevin Warsh raises rates by a quarter percentage point, it would signal the first hardening in over three years. This move would impact the US 10-year sovereign yield, which has already risen nearly 7% in a month and is nearing the 5% threshold.
A 10-year yield above 5% can make India less attractive to foreign institutional investors (FIIs), who recently sold more than ₹14,400 crore of stock. In addition, the risk-free rates at 5% could have ripple effects globally, widening the earnings yield gap between equities and risk-free returns. This could lead to a negative earnings yield gap for stocks, compromising their valuations.
Written by urgent.news from The Economic Times - Top News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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