Nifty returns around 3% so far, but rising US bond yields and crude oil prices may spoil the mood
The month of March is very volatile for the stock market. Investors have received a positive return of 3% in this month so far in 2021, but last year investors suffered a huge loss due to corona. The Nifty had slipped over 23% in the same period.
The situation of agreement between Bull and Bear in 10 years
According to the exchange data, in the last 10 years, there has been a trend of rise and fall in the month of March. Investors have received positive returns 5 times out of 10 during this period. Investors had the highest returns of 10% in March 2016, 9% in 2011 and 7% in 2019, while a huge loss of 23% was reported in March 2020. However, in February 2021, investors received a return of 6%.
US bond yield and crude oil prices will determine market direction
In the coming days too, the direction of the market will be very much on the US bond yield and crude oil movement in the international oil market. As a result, the stock markets closed for two consecutive days last week. According to S Ranganathan, head of research, LKP Securities, the bond yields and oil surged led to a sell-off in the stock market.
Rusmik Oza of Kotak Securities also believes that there may be a lot of ups and downs in March. The stock market move will depend on global cues, as there is no major domestic trigger for the market after the budget.
Why does the bond market impact the equity market?
The bond market is much larger than the stock market all over the world. The Central Bank of America, the Federal Reserve, has assured to maintain the low cost of money. Investors understand this risk, if the cost of borrowing increases, the discounted cash flow (DCF) value of the companies will fall. This will have a direct impact on the price of equity. It is a negative element, which now shows its influence in the equity market.
Intermittent decline for bull market
The market analyst described the intermittent decline as part of a healthy bull market. In such a situation, investors are advised to buy in any decline for the long term. The current bull market trend saw 4 major price corrections, which ranged between 7-11% and averaged 9.5%.
Trend of foreign and domestic investors in the stock market
Foreign Institutional Investors (FIIs) pulled out more than 60 thousand crore rupees from the market in March last year, which are now seen as net buyers. Similarly, if we look at the data for the month of March, 6 years out of the last 10 years, domestic institutional investors (DII) have sold in the domestic market.
