Diwali brings depression in the stock market

- The Hamas-Israel war has a negative impact on US bonds

- Sensex 1857, Nifty 530 points down in four days wiping out Rs.12.5 lakh crore in investors' wealth

AHMEDABAD: Just at the time of Diwali festival, the darkness of selling has covered the stock market. The sell-off comes amid a war that has erupted between Israel and Hamas, and forecasts that US interest rates will rise more than expected. Since October 17, Sensex has fallen by 1857 points. The Nifty 50 index has also fallen by 530 points.

These days, a total of Rs.12.52 lakh crore has been wiped out in the assets of investors. Sensex fell by 826 points and Nifty by 261 points amid heavy selling in the stock market on Monday, a loss of Rs.7.59 lakh crore has been seen in a single day. The Indian currency rupee also weakened by seven paise against the dollar to close at 83.19 due to a crash in the stock market and an increase in the yield of American bonds. Following the Russia-Ukraine war, the ongoing war between Israel and Palestine and fears that it will affect the Middle-Eastern Gulf countries have also seen a rush to US bonds and the dollar. American bonds and the dollar are considered the safest investments in the face of uncertainty of war and inflation.

After the war between Russia and Ukraine that started last year, the global economy faced the challenge of curbing inflation and inflation. Due to this challenge, under the leadership of the American Federal Reserve, interest rates started to rise worldwide. Efforts to curb inflation by raising interest rates and reducing demand have not been successful yet. The US job market and economic growth figures show strength, so the Federal Reserve is likely to raise interest rates further. Amidst this possibility, the yield of the 10-year bond of America crossing five percent for the first time in 16 years has also seen its effect on the relatively risky stock market. This possibility is likely to intensify the sell-off in the stock market.

Amid weak trends in global markets, Sensex recorded a gap of 826 points on Monday, the first trading day of the new week, for the fourth consecutive day as selling pressure continued in the domestic market. While Nifty also recorded a decrease of 261 points.

According to analysts, trading sentiment was affected by crude oil price crossing $90 per barrel. Reports that US bond yields crossed 5 percent for the first time had an adverse effect on the market, amid fears of an Israeli-Hamas escalation of the war.

Sensex fell by 825.74 points to 64,571.88 following heavy selling pressure after these reports. While the Nifty closed by 260.90 points at 19,281.75. The midcap index fell by 2.5 percent and the small cap index by 4.18 percent.

Elsewhere in Asia, South Korea's Kospi, Japan's Nikkei and China's Shanghai Composite closed lower. European markets were trading with losses in the afternoon session. Last Friday saw a drop in the American markets. Meanwhile, international oil benchmark Brent crude rose to $92.18 a barrel on rising tensions in West Asia.

Investors' assets today fell by Rs. 7.59 lakh crore to Rs. 311.30 lakh crore due to sudden selling pressure.

Financial markets tumble as US bond yields hit 16-year highs

An alarm bell has rung for the world's financial markets, accustomed to paying zero or almost zero interest for years. The yield on the US 10-year bond, which is linked to global bond markets, corporate financial transactions and home loans of American citizens, crossed 5 percent for the first time in 16 years. After 5.01 percent on Friday, it rose again to 5.04 percent today. Bond yields are rising on the assumption that US interest rates will remain high for longer than expected, with the Federal Reserve still raising interest rates if necessary. The Israeli-Palestinian war is also driving investors away from stock market risk and into the safety of bonds.

The interest rate on US two-year treasury paper was seen at 5.125 percent and 30-year bond yield increased to 5.164. After the month of May, the yield of the 10-year bond of America has seen an increase of 1.60 percent. A sell-off is seen in the stock market as US bond yields rise and the safe-haven but non-interest bearing gold prices also fall.

On Friday, the US government released its budget deficit figures. According to this figure, the government recorded a deficit of 1.7 trillion dollars in expenditure against revenue, which was 23 percent higher than the previous year. The effect of such a high deficit was also seen on bond yields when the government is scrambling to raise money, threatening a shutdown. On the other hand, Federal Reserve Chairman Jerome Powell signaled that interest rates may have to be raised further. Powell said the strength of the U.S. economy and employment figures indicate that further monetary tightening (ie, interest rate hikes) may be needed.