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Bond Yield Spread Of India Over U.S. Hits A 12-Year Low; Likely Impact On Nifty50 P/E Ratio Mitigated By India’s ‘Growth-Inflation’ Dynamics: ICICI Securities

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U.S. 10-year bond yield has risen almost 100 basis points to reach ~3.6% since August 2022 on the incrementally hawkish stance of the U.S. Fed although 10-year India bond yield has remained flat.

Consequently, the spread of 10-year bond yield of India over U.S. has reached ~360 bps, which is the lowest since August 2009. Spread of 10-year bond yield of India over U.S. has a largely positive correlation with the price-to-earnings of Nifty50 based on data for past two decades with very few exceptions.

In other words, as the spread of 10-year bond yield of India over U.S. increases / decreases, the valuation of the Nifty50 index expressed in terms of forward P/E has historically shown an increasing / decreasing trend.

Going by the correlation for the past 20 years, the recent decline in spread can potentially put pressure on the P/E multiple of the Nifty50.

Click on the attachment to read the full report:


This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

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