Hardening of the US bond yields has sapped investor sentiment across the globe. Last week, the 10-year U.S. Treasury note yield rose to around a one-year high of 1.63%. The spread between the 2-year and 10-year notes at 148.34 basis points, the widest since September 2015. Domestic equity investors are worried that tightening yield curve could trigger fund outflow from Indian equities.
The Federal Reserve is expected to meet on Mar16-17. The meeting will be important as investors and traders alike await the central bank’s policy decision. Consensus estimates expect the monetary authority to maintain the interest rate at 0.25% and continue with the purchase of treasury securities and mortgage-backed debt. Most market participants anticipate Fed Chairman Jerome Powell to reiterate that the central bank remains far away from reaching its employment and inflation goals at his press conference after the conclusion of the meeting on March 17. However, given the background of climbing yield curve and the $1.9 trillion stimulus bill signed into law by President Joe Biden, investors are keen to decipher the tone of the central bank with regards to the timeline of the next rate hike.
Spiking COVID cases
The number of COVID cases in India has been on the rise again, and this has left market participants antsy. On Sunday, India reported 25,317 new Covid-19 cases, the highest since December 19, taking the total tally of infections to 1,13,59,048, according to data from the Union Health Ministry. With 158 deaths in the last 24 hours, the overall death toll rose to 1,58,607. Maharashtra continued to report the highest number of cases followed by Kerala, Punjab, Karnataka, Tamil Nadu and Madhya Pradesh. Maharashtra reported 15,602 new cases, while Punjab found fresh 1,510 cases, the highest since September 25.
This week is likely the busiest the primary market has been in recent times, with 5 companies making their debut in the market. Laxmi Organic Industries, Craftsman Automation, Kalyan Jewellers, Nazara Technologies and Suryoday Small Finance Bank are set to open their initial public offerings (IPO) for subscription. Specialty chemicals manufacturer Laxmi Organic Industries and automotive components maker Craftsman Automation will open their public issue of Rs600cr and Rs823.69cr, respectively, today while the bidding for Kalyan Jewellers' Rs1,175cr IPO will begin the next day. Rakesh Jhunjhunwala-backed mobile gaming company Nazara Technologies and Suryoday Small Finance Bank are planning to raise Rs582.91cr and Rs582.33cr through public offers that open on March 17. Apart from these IPOs , the Rs760cr public issue for Anupam Rasayan, which opened on March 12 will be available for bidding till March 16.
Precision engineering solutions company MTAR Technologies will be making debut on bourses on March 15. The Rs 597-crore initial public offering (IPO) of MTAR Technologies received overwhelming response from investors. The three-day issue, which closed on March 5, was subscribed over 200 times.
The official data for wholesale inflation data for the month of February will be released today. Markets will also react to CPI inflation data and IIP numbers, which were released post market hours on Friday. Retail inflation came in higher than the previous month at 5.03% for February as against 4.06% in the previous month. IIP contracted by 1.6% for January as against 1% growth in the previous month.
Wall Street’s main indexes ended mixed on Friday even as investors fretted over rising bond yields which rose to a 1-year high. The Dow Jones Industrial Average gained 293.05 points, or 0.9%, to finish at 32,778.64, marking another all-time high. The S&P 500 index rose 4 points, or 0.1%, to end at 3,943.34, booking a closing record. The Nasdaq Composite Index fell 78.81 points, or 0.6%, to finish at 13,319.86.
The recent rise in U.S. Treasury yields has raised fears of a sudden tapering of monetary stimulus and put downward pressure on Wall Street in recent weeks. The yield on the benchmark 10-year note hit 1.642 per cent on Friday, the highest level since February of last year. All eyes are now turned to the Fed meeting in the upcoming week. The speedy distribution of vaccines and more fiscal aid have spurred concerns of rising inflation despite assurances from the Federal Reserve to maintain an accommodative policy.