The drama over the debt ceiling and infrastructure bill in Washington seems to have an effect on the global equity markets. In the US, technology companies led a sell-off in stocks. Nasdaq 100 slid 3.1 per cent in five days, the sharpest since March. The S&P 500 index slumped 2.8 per cent and the Dow fell 2.8 per cent.
In India, the BSE Sensex slid 2.39 per cent in five days and the Nifty dropped 2.12 per cent. The weak show may go on for another week owing to cues from global markets and profit booking. Realty and pharma were in the green. Metals, auto and IT closed in the red.
In the US, the increased expectation of inflation caused by a sharp increase in energy prices has caused longer-term interest rates to surge, disrupting the flow to equity markets. Also, a rise in Treasury yields is forcing investors to reassess whether the popular stocks are overpriced. A rise in yields means Treasurys are paying more in interest, and that gives investors less incentive to pay high prices for stocks and other bets riskier than the US government bonds. Tech stocks particularly suffered because they were perceived as more expensive than the rest of the market.
