Market may fall further to compensate for sharp rise in bond yields

The equity and the bond market are joined at the hip through respective yields on both instruments

There has been a sharp decline in equity valuation in India in the past year, but foreign portfolio investors (FPIs) continue to be sellers on Dalal Street, thanks to an even bigger rise in bond yields in the US.

The benchmark BSE Sensex’s trailing price-to-earnings (P/E) multiple is down nearly 40 per cent, from a peak of 34.3x at the end of March 2021 to 21x on Thursday. This is the lowest valuation for the index in six years, excluding the Covid lockdown period in March-May 2020.

Analysts say equity valuation in India needs to fall another 20 per cent