According to the agency, the risk aversion and safe haven demand led to a decline in the government securities (G-SEC) yields since last month along with the relentless efforts of the Reserve Bank of India to inject liquidity and lower interest rates, the equity index too has recovered on what can be taken as an improvement in investor sentiments. Also, the rupee touched record low during the same period.
On the flip side, when compared to global benchmarks, Indian equity indices have rose higher, while the fall in yields of the benchmark 10-year government securities has been sharper is case of advanced economies. “The benchmark equity index – Sensex has risen by 23 per cent in the one-month period since the lockdown. This increase however has not been steady. It has been interspersed with period of sharp day to day fluctuations with domestic markets taking cues from global markets, evolving economic outlook, policy measures as well as the outflow of foreign investments,” the report points out.
In fact, Indian indices (both Nifty and Sensex) have performed way better than their global counterparts including NASDAQ and Dow Jones, which have recorded a 16 per cent and 11 per cent increase respectively.
“In the US and UK, 10-year government bond yields have however witnessed a sharper fall in yields than Indian government bonds. This is due to the rush to safe haven buying of US and UK government securities by global investors,” points out Kavita Chacko, Senior Economist at CARE Ratings.