Mumbai: Rising crude oil prices have emerged as the biggest concern for financial markets, with inflation fears, higher bond yields and foreign fund outflows creating pressure on equities, a market expert said on Monday.
Speaking to IANS, Shrikant S. Chouhan, Head, Equity Research at Kotak Securities said crude oil prices continue to remain elevated with no signs of relief, adding that prices increased further by around $2-3 over the weekend.
“As long as crude prices remain high, inflation concerns will continue to dominate global markets,” he said.
He noted that persistent inflationary pressure is leading to a sharp rise in bond yields, especially in the United States.
Referring to developments last week, Chouhan said US bond yields across 10-year, 20-year and 30-year maturities witnessed a significant surge.
“These bond yields are now moving towards exceptional levels. Whenever such a trend emerges, bond markets start attracting large investments,” he told IANS.
Chouhan explained that higher returns in developed market bonds usually trigger capital outflows from emerging markets such as India, as global investors shift funds towards safer debt instruments in markets like the US and Japan.
“Because of these global headwinds, Indian equity markets are likely to remain range-bound in the near term,” he mentioned.
Speaking on foreign institutional investor (FII) activity, he said persistent selling by overseas investors is linked to rising global uncertainty and elevated crude oil prices.
He added that if crude prices sustain around the $105-$110 per barrel range, the impact could begin to reflect more strongly on the global economy.
He also pointed out that higher crude prices are weakening currencies across markets, adding to concerns for emerging economies dependent on energy imports.
“The combination of expensive crude oil, rising bond yields and continued foreign fund outflows is creating a challenging environment for equity markets globally as well as in India,” Chouhan noted.
(IANS)
