Indices end week 0.7% lower amid FPI selling, US bond yield pressure

Business Standard

23-05-2025

The benchmark indices ended the week with minor losses amid heavy selling by foreign portfolio investors (FPIs), driven by concerns over the US fiscal outlook and rising bond yields. For the week, both the Sensex and Nifty declined by 0.7 per cent. This comes after the indices recorded their best weekly run since 18 April last week, as investors welcomed a truce with Pakistan, trade talks with the United States (US), and expectations of domestic interest rate cuts.
The indices, however, gained on Friday amid easing US bond yields and were the best-performing Asian equity benchmarks after the Philippines' PSEi index. The Sensex ended Friday's session at 81,721, up 769 points or 0.95 per cent. The Nifty closed at 24,835, a gain of 244 points or 0.9 per cent. The total market capitalisation of BSE-listed firms rose by ₹3 trillion to ₹442 trillion. The rupee appreciated by 0.9 per cent on Friday — its highest single-day gain since 11 November 2022 — to settle at 85.21 per US dollar.
Long-dated US bond yields eased over the past two sessions after rising earlier in the week. The 30-year US bond yield, which had hit its highest level since October 2023, declined on Friday to 4.98 per cent. The 10-year yield was at 4.45 per cent, down seven basis points.
Rising yields make US bonds more attractive and often prompt FPIs to withdraw from emerging markets, including India. Safe-haven assets such as bonds gained earlier in the week as investors fretted over the impact of former US President Donald Trump's tax bill. Gold posted its best weekly gains since 11 April, trading at $3,353 per ounce.
Trump's tax-and-spending bill, which fulfils several populist promises, is expected to add about $3.8 trillion to the US government's $36.2 trillion debt over the next decade. Concerns about this rising debt led to a credit rating downgrade by Moody's last week.
In the final leg of the earnings season, US trade policy and the monsoon outlook are expected to influence market direction. Meanwhile, Trump has threatened to impose a 50 per cent tariff on goods from the European Union (EU) starting in June — a reminder that trade tensions remain high and can disrupt equity markets quickly.
'The ongoing earnings season is entering its final phase next week, with investors closely tracking corporate performance across sectors. Meanwhile, the arrival of pre-monsoon showers across parts of India lifted market sentiment ahead of an anticipated above-normal monsoon, which is expected to support rural demand and broader economic activity. Looking ahead, markets are expected to remain firm, with participation likely from broader market segments as macro and earnings tailwinds continue to provide support,' said Siddhartha Khemka, Head – Research, Wealth Management, Motilal Oswal Financial Services.
Market breadth was strong on Friday, with 2,323 stocks advancing and 1,639 declining. Reliance Industries, which rose 1.2 per cent, was the biggest contributor to Sensex gains, followed by HDFC Bank, which gained 0.7 per cent.
'The rebound reflects positive sentiment despite mixed global cues, as participants are using dips to accumulate quality stocks across sectors. We maintain our view of adopting a 'buy on dips' strategy, focusing on selective stock picking unless the Nifty decisively breaks below the 24,500 mark,' said Ajit Mishra, SVP – Research, Religare Broking.