The rise in US bond yields is affecting emerging markets like India, according to V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services. There are two main factors influencing the stock market. Firstly, the strong US economy is supporting global growth and equity markets, which is positive. However, the sharp increase in US bond yields, with the 10-year yield at its highest point since 2007, is negatively impacting capital flows to emerging markets like India.
For sustained growth in foreign institutional investor (FII) inflows to India, a decrease in US bond yields is necessary. We will only have clarity on this once we see trends in US inflation and the Federal Reserve’s monetary stance indicating a softening. It would be wise for investors to wait for more information on these macro trends.
In the meantime, long-term investors can consider accumulating high-quality growth stocks. Large-cap banks are currently fairly valued and there are promising prospects for large-cap companies in the capital goods sector. On Tuesday morning, the BSE Sensex rose by 54 points to reach 65,270 points. NTPC and Bajaj Finance saw an increase of over 1 percent.