Indian government bond yields jumped sharply on Tuesday, with the benchmark 10-year bond yield witnessing its biggest surge in eight months, as early voting trends in the Lok Sabha election results 2024 so far were falling short of market expectations.
The benchmark 10-year bond yield was at 7.0130% as against its previous close at 6.9438%. Earlier in the day, the yield hit 7.0375%, the highest in nearly two weeks, and also witnessed its biggest single-session climb since October 6, Reuters reported.
The rupee also declined and was at 83.35 against the US dollar, down from 83.14 in the previous session. The rupee hit an intraday low of 83.4375 in early trading.
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The trends in the election results showed that Prime Minister Narendra Modi’s National Democratic Alliance (NDA) was leading, but with an unclear margin. The trends were not in-line with the exit polls, which indicated a thumping majority for the BJP, leading a sharp rally in the Indian stock market on Monday.
“Markets had clearly not factored in such a scenario, which is leading to strong upward moves in yields, and the election-led uncertainty is expected to persist, till we start seeing some clear victories for the incumbent government,” a trader with a state-run bank told Reuters.
Also Read: Why is Indian stock market falling today? — explained
Analysts believe the fiscal consolidation trajectory may by impacted if the BJP forms government with a weak mandate, and even the active foreign flows may take some breather, with only passive flows coming in as Indian bonds get included in JPMorgan’s debt index by end of this month, Reuters reported.
The Reserve Bank of India (RBI) will also announce its monetary policy decision on Friday. The central bank is widely expected to keep repo rates and stance unchanged, but commentary on inflation and liquidity management would be watched out for.
Siddharth Kothari, an economist at Sunidhi Securities & Finance, said he expects the benchmark bond yield to be in a 6.95%-7.05% range till the RBI policy, Reuters reported.
Also Read: Markets crack on election results 2024 day, what should new investors do amid this volatility?
Meanwhile, the Indian stock market benchmark indices, Sensex and Nifty 50, crashed over 4% each, erasing all previous day’s gains.
At 11:00 am, the Sensex was down 3,255.97 points, or 4.26%, at 73,212.81, while the Nifty 50 was down 973.70 points, or 4.19%, at 22,290.20.
“The steep fall is due to the results so far falling short of the exit polls which the market had discounted yesterday. If BJP doesn’t get a majority on its own there will be disappointment and this is getting reflected in the market. Also it is possible that Modi 3.O may not be as reform-oriented as the market expected and may turn more welfare- oriented. This is getting reflected in the strength in FMCG stocks,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
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(With inputs from Reuters)
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Published: 04 Jun 2024, 11:09 AM IST