The BSE Sensex fell 434.93 points, or 0.85%, to end at 50,889.76. NSE Nifty declined 137.20 points, or 0.91%, to close at 14,981.75. Both indices have shed almost 2.5% in the past four days.
Rising bond yields worldwide over the past week have poured cold water on optimism around risky assets such as emerging market equities, slowing down flows of late.
On Friday, Foreign Portfolio Investors net bought shares worth Rs 119 crore. The average daily purchases by foreign investors so far in February has been close to Rs 2,200 crore. Domestic Institutional Investors were sellers to the tune of Rs 1,175 crore on Friday.
Investors considered low bond yields as a key reason for heightened appetite for equities in the past year.
“Bond yields are inversely proportional to equity returns and when bond yields decline, equity markets tend to outperform. So when yields rise, equity market returns tend to falter,” said Nirali Shah, head of research, Samco Securities.
Flows from overseas funds ensured sentiment was positive despite concerns over lofty equity valuations. Domestic institutions — mainly mutual funds — have been selling due to redemption pressure from individual investors amid worries about the pace of the surge in the market. So far in 2021, foreigners have pumped over Rs 43,000 crore into equities here, while their domestic peers have pulled 28,600 crore out of stocks during this period.