Widening Yield Spread Signals Caution for Overbought Nifty
• Spread between earnings yield and bond yield rose to 258 basis points, highest in 5 years
• Higher spread indicates bonds more attractive than equities; historically muted Nifty returns for 1 year when over 150 basis points
• Nifty at 2-year high P/E of 21.7; 10-year bond yields 7.14%
• Elevated spread may sustain if lower bond yields expect falling rates from central banks
• Technicals suggest overbought Nifty; 14-day RSI at 78.4, over 70 indicates overbought