Inflation, bond yields headwinds for D-St: Nomura

MUMBAI: Likelihood of a rise in inflation, surging COVID-19 cases and rising bond yields could hinder further gains in equities in the near term, said Nomura Financial Advisory and Securities India.

The Nif ty 50 and Sensex have risen around 5% each in 2021 so far, and were up 105% from the lows of March.

Nomura Financial Advisory and Securities India believes that a rapid spread of the highly contagious mutant strain of coronavirus even before inoculations are adequately ramped up may lead to a re-imposition of lockdowns in certain regions, which in turn may stall the ongoing economic recovery.

Further, higher commodity prices could weigh on corporate profitability and a rise in bond yields could impact equity valuations, the brokerage firm said.

Bond yields may rise further, given expectation of higher inflation, which could lead to lower valuation multiples, the brokerage firm said.