Fears of global recession trigger equity sell-off


10-year bond yield in the U.S. falls below 3-month yield for first time since 2007

Concerns of a global economic slowdown with renewed fears of a recession led to a sell-off in global equity markets with the Indian benchmarks mirroring the weak global trend to shed nearly 1% on Monday.

While selling was witnessed across sectors , banking and financial stocks bore the maximum brunt with heavyweights such as ICICI Bank, HDFC, State Bank of India, Axis Bank, Kotak Mahindra Bank and Yes Bank among the top losers in the Sensex pack.

The 30-share benchmark lost 355.70 points, or 0.93%, to close below the psychological 38,000-mark at 37,808.91. The broader Nifty ended the day at 11,354.25, down 102.65 points, or 0.90%.

The widespread selling further corroborated the weak market breadth with 1,932 stocks in the red on the BSE against only 747 gainers. Both, BSE Midcap and BSE Smallcap indices lost more than 1% each on Monday.

Global indices drop

Among other major indices, the Nikkei lost over 3% while Hang Seng was down 2.03%. The benchmarks of China, Japan and South Korea also shed over 2% each. The overnight Dow Jones and Nasdaq were also down by 1.77% and 2.50%, respectively.

Market participants attributed the sell-off to concerns about recession after the 10-year bond yield in the U.S. fell below the three-month yield for the first time since 2007. Though the gap turned positive again on Monday, equity investors remained jittery, triggering a sell-off.

Further, the 10-year bond yield in Australia had touched an all-time low, while in Japan, the yield hit the lowest level since September 2016.

“A dovish Fed and inversion of the U.S. yield curve has led to fears of a global recession to resurface,” said Vivek Ranjan Misra, head-fundamental research, Karvy Stock Broking.

“High valuations of stocks leave very little room for disappointment. However, we believe that while data is consistent with a slowdown, a recession is unlikely in the near future and equities should bounce back over the next two or three months,” added Mr. Misra. Interestingly, foreign portfolio investors (FPIs) continued to be net buyers of Indian shares on Monday at nearly ₹151 crore. In March, foreign investors have been net buyers at ₹28,860 crore.


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