Why the bond market won't bounce back to pre-war levels

Higher interest rates globally could limit RBI's room for rate cuts, impacting Net Interest Margins (NIMs) for banks and increasing borrowing costs for other sectors. This could slow credit growth and affect asset quality.

Maintain a cautious stance on rate-sensitive sectors like banking and real estate; look for banks with strong deposit franchises and diversified revenue streams.

For Indian markets, this story mainly matters for the Banking, Financial Services, Infrastructure pocket. The current signal is bearish, so traders should watch whether the effect spreads across the sector or stays limited to a single name.

Watch whether the market validates this read through price action, volume, and breadth. If the headline matters, the signal should show up in execution, not just in commentary.

• •Prospects for global bond markets remain difficult despite a recent ceasefire.
• •Energy prices continue to climb, contributing to stubborn inflation.
• •Central banks appear reluctant to lower interest rates this year.
• •Investors should expect an extended era of higher rates.
• •Risk flag: Prolonged high interest rates could lead to increased NPAs, especially in sectors with high debt.