Stocks dipped, the 10-year bond yields touched a new three-year high and the rupee fell to a record low in intra-day trades on Tuesday, as markets stayed nervous ahead of the Reserve Bank of India’s monetary policy announcement on Wednesday.
The benchmark bond yield closed at 7.5180%, up 2 basis points over Monday’s close. Meanwhile, the US treasury was ruling at 2.98% late Tuesday evening, having earlier overshot the 3% mark.
The markets are bracing for a 40 bps hike in the key repo rate and a sharp upward revision in the central bank’s inflation forecast for FY23. Experts said they are pencilling in a peak repo rate of close to 7% by about April next year.
Stocks were in the red for the third straight session on Tuesday. The Sensex tumbled 568 points or 1.02% to close at 55,107. 34 as investors continued to take risk off the table. The broader NSE Nifty dipped 153.20 points or 0.92% to end at 16,416.35.
Market watchers said positions were offloaded ahead of the RBI policy since a repo rate hike would automatically mean higher home loan rates. Banks have already hiked their lending rates for companies and interest rates could go up further. Higher yields are not helpful for the equity markets.
The relentless selling by foreign portfolio investors (FPI) — who are anxious about high inflation and slowing corporate profits — has pressured the Indian currency which slipped by 8 paise on Tuesday to 77.71, according to Bloomberg. The intra-day low on Tuesday was Rs 77.74, a record low. FPIs sold stocks worth Rs 2,397.65 crore on Tuesday, provisional data showed.