After a Historic Weak Streak, Are the Bulls Finally Returning?

Russian revolutionary leader Vladimir Lenin is often quoted as saying, “There are decades where nothing happens; and there are weeks where decades happen.” The past week in financial markets has certainly felt like one of those periods, with unusual price action, rising bond yields, renewed inflation concerns and sharp moves across commodities and equities.[EasyDNNnews:PaidContentStart]

The Nifty 50 itself has produced a rare technical sequence. Post the introduction of the CAS framework in the Indian market, the index had never gone 12 consecutive trading sessions without surpassing the previous session’s high. Until Wednesday, that streak stood at 12 sessions, comfortably exceeding the earlier record of nine. The pattern reflects persistent selling pressure at higher levels and an inability among buyers to sustain follow-through rallies.

The bigger concern, however, has emerged from global bond markets. The 30-year US Treasury yield climbed to a multi-year high, while Japan’s 30-year government bond yield reached a record level. Rising long-term yields matter because they increase borrowing costs, tighten financial conditions and can reduce investors’ willingness to pay higher valuations for equities.

Central Banks are also sounding more cautious on inflation. Minutes from the latest RBI meeting showed policymakers paying closer attention to emerging price pressures. RBI Governor Sanjay Malhotra noted that inflation has not broadened significantly across the economy, but headline inflation has begun moving higher from the unusually subdued levels seen earlier.

Crude oil has added another layer of uncertainty. Brent crude remained near USD 92 a barrel, with the unresolved US-Iran standoff keeping geopolitical risk elevated. Persistently high energy prices could complicate the inflation outlook and limit the room available to central banks to ease monetary policy.

A similar shift is visible in the United States. Minutes of the Federal Reserve’s July 28-29 meeting showed growing concern that progress towards the 2 per cent inflation target could be slower and less consistent than previously expected. The Fed had kept its benchmark policy rate unchanged at 3.50-3.75 per cent, although the decision was not unanimous. Some policymakers indicated that further tightening may have to be considered if inflation remains stubborn.

The pressure spilled into the US Treasury market, where a sharp sell-off pushed 30-year yields to nearly two-decade highs. The US Treasury subsequently announced plans to more than double buybacks of 10- to 30-year securities to at least USD 4 billion per operation, from USD 2 billion earlier. Long-term yields eased following the announcement, as investors viewed the move as supportive of market liquidity and potentially helpful in containing borrowing costs.

Back home, one pocket of the market has enjoyed a much sweeter week. Sugar stocks rallied sharply, supported by a roughly 10 per cent rise in domestic sugar prices over the past month amid tightening supplies and stronger demand ahead of the festive season. The government has also tightened stockholding limits following the surge in prices. After the recent run-up, however, chasing every sugar stock may not be prudent. Within the sector, integrated producers with diversified revenue streams, stronger balance sheets and relatively low debt appear better placed to navigate commodity-price cycles.

The 23,960-24,040 zone remains an important support area for the Nifty 50. As long as this band holds, the possibility of a recovery remains intact. A sustained rebound could eventually bring 24,600-24,700 back into focus over the medium term. Until then, the unusual combination of elevated crude prices, rising global yields and cautious central banks warrants a selective rather than aggressive approach.

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