Sensex, Nifty extend fall to third day; bond yields, Israel-Iran tensions weigh on sentiment

Stock Market Today

The Sensex and the Nifty extended fall to the third straight day as traders assess the market impact of the worsening situation in West Asia. Rising US treasury bond yields, which shot to a five-month high, also weighed on investors' risk appetite.

Analysts advise investors to adopt caution and wait and watch how the developments unfold.

The Sensex was down 334.28 points, or 0.46 percent, at 73,065.50, and the Nifty was down 86.50 points, or 0.39 percent, at 22,186.00. The market breadth, however, was in favour of gainers, as around 1,811 shares advanced, 851 declined and 107 were unchanged.

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The rising bond yields reduces the prospects of rate cuts by the US Federal Reserve this year, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said. High bond yields would be negative for risky assets such as equity and accelerate FII selling in emerging markets like India.

Israel military chief’s statement that “there will be a response to Iran’s attack on Israel” has increased the probability of escalation of tensions in the already volatile region.

"We don’t know the timing and the nature of the Israeli response, which can be totally unexpected. This is likely to keep the markets weak in the near-term," Vijayakumar said.

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Vaishali Parekh, Senior Vice-President of Technical Research at Prabhudas Lilladher placed 22,000 as a strong support zone for Nifty due to weakening positive bias amid Middle-East tensions. "Nifty's support for the day is seen at 22,100 level, whereas resistance is forecasted at 22,400," she added.

Having said that, broader markets outperformed benchmarks within the first hour of trade. BSE Midcap and BSE Smallcap indices surged up to 0.7 percent on April 16. Fear gauge, India VIX, meanwhile eased marginally to 12.46.

Among sectors, Nifty IT and Nifty Realty indices were the worst performers, whereas Nifty Auto and Nifty Metal indices saw marginal gains, rising up to 0.4 percent on April 16 morning.

Given rising geopolitical tensions, firming up dollar and higher bond yields, the domestic currency also opened at a record low against the US dollar on April 16. The rupee opened 6 paise lower at 83.51 a dollar as against the previous close of 83.45.

Meanwhile, the US dollar index, which gauges the greenback’s strength against a basket of six currencies, was up 0.13 percent at 106.35.

From an investment perspective, Vijayakumar of Geojit Financial Services added to accumulate quality largecaps for the long-term. "Further corrections will make valuations of large-caps fair. Largecaps in banking, IT, autos, capital goods, oil & gas and cement are ideal for long-term investment," he recommended.

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