I posted Macroeconomic indicators, In which one was Bond Yield, Which is also reason of Sell off seen in market.
This Bond Yield impact Equity inversely.
When valuing equities , investors add the equity risk premium they seek to a risk-free rate to compute the expected rate of return. Usually the easiest way to estimate the risk-free rate is to default it to the long government bond yield. This is why long bond yield matter to equities.
Now, theoretically, given that the long bond yield is the risk-free rate, a higher bond yield is bad for equities and vice versa.
At Present the Bond yield is at highest which is considered as Safest investment over Stock market.
The sudden rise in domestic and global bond yields recently moderated the enthusiasm of equity market participants/Investors around the world bonds in the United States and India have triggered concern over the negative impact on other asset classes, especially stock markets, and even gold. The yield on 10-year bonds in India moved up from the recent low of 5.76% to 6.20% in line with the rise in US yields, sending jitters through the stock market, where the benchmark Sensex fell 2,300 points last week.
Second With the depreciation of Rupee over few days. Rupee Traded very weak Today after Gap down opening on the back of strengthening of Dollar Index.To Add more Rise in the Crude oil price kept rupee under pressure.
Third The recent surge in steel, aluminum, copper, palladium and rhodium prices have prompted automobile manufacturers to hike the prices of vehicles across sectors.
The rising steel prices do not bode well for the real estate sector as well.
All these factors if you Conclude Spoke Worry in investor over Risk of investment in Equity.As Investing in Equity can give negative results, Inspite of lower returns in Bond But Safety of Investment Drift out money from equity.
Hope you find this useful.