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How are US Bond Yields Leading to fall in Indian Stock Market | Business | Sarthak Ahuja Analytics Table

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Why is the Indian stock market falling, and what is the US Bond Yield which is causing this? If you had invested Rs 1 crore in India (NIFTY 50) two years ago, it would be Rs ~88 lakhs right now... The same amount in the S&P 500 would be Rs ~1.35 crores... same in Germany DAX at Rs ~1.3 crores... In Japan’s Nikkei, it would be Rs ~1.5 crores... and in Taiwan, well above Rs 2 crores... This is with not even taking into account the Rupee depreciation... as that increases the returns in foreign markets much more... So the Indian market is taking a horrible beating... and let’s look at how the US bond yield is beating it further... 1/ Understanding US Bond Yields So the interest offered by the US to people who give a loan to it is at say 4%... so you buy a bond of USD 100, and get an interest of USD 4 on it annually... But when inflation begins to rise... such as it is happening right now due to the unrest in the middle east causing crude oil prices to rise... The Fed or the Central Bank of the US raises interest rates to make it harder for people to borrow money, trying to control inflation... similar to how the RBI raises repo rates in India... And when interest rates of other such deposits rise... people start selling bonds to invest in other deposits... So the price of a bond starts falling from USD 100 to USD 90... and as more people sell, it falls further to USD 80... Now when the price of the bond has fallen to USD 80... and it continues to earn USD 4 as promised by the US Govt... at that point, the interest or the yield is calculated as not 4/100 = 4%... but 4/80 (the new price) = 5%... So the yield if someone invests in the US Govt’s 10 year bond right now is above 5.1%... and this week, the rate for the 30 year bond has gone up to 5.4%... This is probably the highest it has been in over a decade... 2/ Couple this with India’s Stock Market Return for the past 3 years... In such a case, even remaining international investors are pulling out money from India and rushing to earn more interest incomes in the US ---------------------------------------------------------------------------------- Like, Share, Subscribe for more! Follow me on my other social media handles for all updates, events and live sessions- Instagram:casarthakahuja LinkedIn: sarthak-ahuja Website: http://www.casarthakahuja.com/ ---------------------------------------------------------------------------------- A Chartered Accountant with about 10 years of experience in areas of Tax Advisory, Startup Consulting, Fundraising, Audits, Deal Advisory, Business Modelling and contract CFO services. Winner of the ISB Young Leader Award 2017 and the Best All Rounder, PGP Class of '17, Sarthak has also been published about in the leading financial newspapers such as The Financial Express as possibly the youngest Indian to have completed the courses of CA, CS and CMA along with a graduate degree in Financial & Investment Analysis from University of Delhi, all by the age of 23 years

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