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    Article 2 Fin Club

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    Himanshu Gupta
    Rising US Treasury bond yields have negatively impacted the Indian stock market in recent months. When yields rise, foreign investors pull money from Indian equities to invest in higher-yielding US bonds instead. This outflow of foreign capital leads to a decline in Indian stock prices. Additionally, higher US bond yields cause the rupee to depreciate against the dollar, hurting Indian companies that export or have dollar-denominated debt. Investors should be aware of this risk and protect their portfolios by investing in strong companies, diversifying assets, and hedging currency risk.

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    Article 2 Fin Club

    Uploaded by

    Himanshu Gupta
    13 views2 pages
    Rising US Treasury bond yields have negatively impacted the Indian stock market in recent months. When yields rise, foreign investors pull money from Indian equities to invest in higher-yielding US bonds instead. This outflow of foreign capital leads to a decline in Indian stock prices. Additionally, higher US bond yields cause the rupee to depreciate against the dollar, hurting Indian companies that export or have dollar-denominated debt. Investors should be aware of this risk and protect their portfolios by investing in strong companies, diversifying assets, and hedging currency risk.

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    Rising US Treasury bond yields have negatively impacted the Indian stock market in recent months. When yields rise, foreign investors pull money from Indian equities to invest in higher-yielding US bonds instead. This outflow of foreign capital leads to a decline in Indian stock prices. Additionally, higher US bond yields cause the rupee to depreciate against the dollar, hurting Indian companies that export or have dollar-denominated debt. Investors should be aware of this risk and protect their portfolios by investing in strong companies, diversifying assets, and hedging currency risk.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    13 views2 pages

    Article 2 Fin Club

    Uploaded by

    Himanshu Gupta
    Rising US Treasury bond yields have negatively impacted the Indian stock market in recent months. When yields rise, foreign investors pull money from Indian equities to invest in higher-yielding US bonds instead. This outflow of foreign capital leads to a decline in Indian stock prices. Additionally, higher US bond yields cause the rupee to depreciate against the dollar, hurting Indian companies that export or have dollar-denominated debt. Investors should be aware of this risk and protect their portfolios by investing in strong companies, diversifying assets, and hedging currency risk.

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    How US Treasury Bond Yields Impact the Indian Stock Market

    The US Treasury bond yield is the interest rate that the US government pays on money it
    borrows from investors. It is considered a risk-free investment, as the US government has never
    defaulted on its debt. When US Treasury bond yields rise, it means that investors are
    demanding a higher return for their money, as they perceive the US economy to be riskier.

    Current Scenario

    In recent months, US Treasury bond yields have been rising sharply. This is due to a number of
    factors, including the US Federal Reserve's aggressive interest rate hikes in an effort to combat
    inflation. Rising US Treasury bond yields have had a negative impact on the Indian stock market,
    as foreign investors have pulled out money from Indian equities to invest in US bonds, which
    are now offering more attractive returns.

    Impact on the Indian Stock Market

    There are several ways in which rising US Treasury bond yields can impact the Indian stock
    market:

     FPI outflows: Foreign institutional investors (FPIs) are a major source of liquidity for the
    Indian stock market. When US Treasury bond yields rise, FPIs often divest from
    emerging market equities, including Indian equities, and allocate their investments
    towards US bonds. This outflow of capital from the Indian stock market can lead to a
    decline in stock prices.
     Rupee depreciation: A rising US Treasury bond yield typically leads to a depreciation of
    the rupee against the US dollar. This is because investors sell rupees to buy US dollars in
    order to invest in US bonds. A weaker rupee makes Indian exports more
    competitive, but it also makes imports more expensive and hurts the bottom line of
    companies that have borrowed in US dollars.
     Higher borrowing costs: Rising US Treasury bond yields also lead to higher borrowing
    costs for Indian companies. This is because Indian companies often have to borrow
    money in US dollars to finance their operations. Higher borrowing costs can reduce
    corporate profitability and lead to lower stock prices.

    Learnings from the Current Scenario

    The current scenario has taught us a few important lessons about the impact of rising US
    Treasury bond yields on the Indian stock market:
     FPIs are a key driver of the Indian stock market: FPIs are a major source of liquidity and
    foreign investment for the Indian stock market. When FPIs withdraw money from the
    Indian stock market, it can lead to a decline in stock prices.
     The rupee is sensitive to US Treasury bond yields: A rising US Treasury bond yield
    typically leads to a depreciation of the rupee against the US dollar. This can have a
    negative impact on Indian companies that export goods and services or have borrowed
    money in US dollars.
     The Indian stock market is correlated to global markets: The Indian stock market is
    increasingly correlated to global markets. This means that when global markets are
    under pressure, the Indian stock market is also likely to be impacted.

    Conclusion

    Rising US Treasury bond yields can have a negative impact on the Indian stock market. Investors
    should be aware of this risk and take appropriate steps to protect their portfolios. Some ways
    to do this include investing in companies with strong fundamentals and a track record of
    profitability, diversifying across asset classes, and hedging against currency fluctuations.

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