After gaining over 10 percent in February, the Indian stock market witnessed a massive fall on the last trading day of the month as the record overnight jump in US Treasury yields spooked Asian investors. The benchmark index BSE Sensex and broader index Nifty tanked over 3 percent, with massive selling across the board; financial stocks were the worst hit.
Market analysts say that US Treasury yields jumped around 1.6 percent on Thursday, which panicked investors as they are worried that foreign investors will pull their money out of emerging markets like India, which is the largest beneficiaries of this money so far. Japan's 10-year yield also rose to its highest point since early-2016.
"US Federal Reserve Chair Jerome Powell tried to assure the investors earlier this week that the bank will continue to buy bonds and provide liquidity in the market through printing notes. But, some segments still think that the condition of the US economy is not good as portrayed by the US government," Neerabh Vakhariya, an equity research analyst told Sputnik.
Emkay Global--a financial services organisation-- in a note said that a further uptick in yields could pose problems for the broader equities market.
Vakhariya added that a rise in fuel prices will further dampen the mood of the Indian market as next month's inflation figure may see a massive jump. Crude prices have been strengthening for the past several weeks and instability in the Middle-East is likely to fuel the prices further, predicts analyst.
Earlier in the day, benchmark indices in Japan, Australia and South Korea have declined more than 2% each.
Powell said on Tuesday that strong demand is driving Treasury bill yields close to zero.
“It’s a lot of demand for short-term,” said Powell while adding that there’s a lot of liquidity, and people want to store it in Treasury bills.