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Bond Yields Soar, Raising Hurdle for Indian Equities Amid Widening Gap
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CNBC TV18•30-09-2026, 21:54
Bond Yields Soar, Raising Hurdle for Indian Equities Amid Widening Gap
- •India's 10-year benchmark government bond yield climbed to 7.2%, its highest since April 2024, signaling a global bond sell-off impacting local markets.
- •The spread between the 10-year government bond yield and the Nifty 50's dividend yield has reached nearly 600 basis points, the widest since May 2024, making bonds a more competitive investment.
- •Higher risk-free returns from bonds increase the hurdle for equities, requiring stronger earnings growth or cheaper valuations to attract investors.
- •Indian equities have lagged emerging-market peers, with the Nifty 50 declining 19% this year, partly due to limited exposure to the AI-driven tech rally.
- •Foreign portfolio investors turned sellers again in September, offloading nearly $4 billion, adding to the challenging backdrop for Indian equities despite recent valuation compression.
Key Questions Answered
The yield on India's 10-year benchmark government bond climbed to 7.2% as a result of a latest global bond sell-off that pushed yields sharply higher.
Foreign investors reversed their previous buying streak and sold nearly $4 billion worth of Indian equities during the month of September.
The Nifty 50 trades at below 17 times one-year forward earnings, which is lower than its 10-year average of 18.7 times.
