A surge in benchmark bond yields spooked investors as they feared foreign investors will withdraw money from India now and central banks will also have to change their dovish stance to tame the expected rise in inflation.
The 30-share pack Sensex tanked 1,939.32 points or 3.80 per cent to close at 49,099.99. The index hit a low of 48,890.48 during the day. Its broader peer NSE Nifty plunged 568.20 points or 3.76 per cent to 14,529.15.
“The bond market is expecting the likely rise in inflation to push the US Federal Reserve to either lower monthly bond-buying or hike interest rates, an adverse factor for markets like India, which have been a major recipient of foreign inflows of late. This is despite the US Fed’s reassurance of keeping the low cost of money intact,” said Devang Mehta, Head Equity Advisory, Centrum Broking.
