Rs 3.5 lakh crore gone from D-Street this month. Is Sensex outlook turning foggy?
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Synopsis
The Indian rupee declined against the dollar on Tuesday after the Bank of Japan's unexpected hawkish shift prompted a rise in Japanese and US yields, and impacted risk appetite. The rupee was at 82.8 per US dollar around noon.
Here are key factors dragging the market lower today:
One of the biggest factors spoiling the mood in the international market today was the surprise tweak in bond yields by the Bank of Japan. The central bank has decided to allow the 10-year bond yield to move 50 basis points on either side of its 0% target, wider than the previous 25 basis point band. The move will allow long-term interest rates to rise.
2) Global market mood
Wall Street declined on Monday for a fourth day on fears that interest rates may stay elevated longer than previously forecast. Japan's Nikkei 224 index closed down 2.46%. Elsewhere in Asia, Australian shares extended earlier losses to be off by 1.54% in afternoon trade. Hong Kong's Hang Seng Index was down 1.9% while China's CSI300 Index was off 1.62%.
3) Recession fears
Analysts say the overarching theme impacting global equity markets now is the possibility of a US recession in 2023. "While a slowdown in the US economy is a given, opinion is divided on whether the US can manage a soft landing of the economy. Economic data indicate a slowing economy and declining inflation which implies that the Fed is close to pausing on rate hikes. Confirmation of this trend can lead to revival in equity markets," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Bond yields in the United States and Japan jumped after the BOJ decided on Tuesday to allow long-term interest rates to rise more by widening the band around its yield cap. The 10-year Treasury yield climbed 3.71%, the highest level this month.
Stocks Recommendations
The Indian rupee declined against the dollar on Tuesday after the Bank of Japan's unexpected hawkish shift prompted a rise in Japanese and US yields, and impacted risk appetite. The rupee was at 82.8 per US dollar around noon.