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Asian share markets are mixed today as Chinese and Japanese shares fall. The Nikkei 225 is down 0.6% while the Hang Seng is down 2.3%. The Shanghai Composite is trading down by 2.5%.

Back home, India share markets opened the day on a negative note. The BSE Sensex is lower by 220 points while the NSE Nifty is trading down by 70 points. The BSE Mid Cap index and BSE Small Cap index both opened the day down by 0.5% & 0.3% respectively.

In news from the global economy. Following the Reserve Bank of India's decision to hike key interest rates by 25 basis points (bps), the US Federal Reserve held its rates steady while reiterating their plan to gradually lift borrowing costs to keep the economy expanding at a healthy pace.

Federal Reserve Chairman Jerome Powell is trying to nurture the second longest U.S. expansion on record by slowly reducing the amount of support that monetary policy provides to growth.

The US economy is riding a tailwind from tax cuts and higher federal spending, though a trade war threatens to dent growth.

Tracking the US Fed announcement, the yield on the benchmark 10-year U.S. Treasury note broke above 3% for the first time since June after the government said it intended to increase its borrowing from the bond market in the coming quarter to fund spending and debt obligations.

This Chart Has the Key to Your Future Stock Market Returns

One of the key determinants of liquidity flows in the stock markets is interest rates. The 10-year US Treasury bond is a global interest rate benchmark.

The prolonged artificial suppression of interest rates and money printing by the US Fed, flooded the global financial markets with cheap liquidity and lifted stock prices to frothy levels.

In fact, at the recent shareholder meeting of Berkshire Hathaway, Charlie Munger did make a reference to this condition:

• Low-interest rates are unfair to old savers, but favourable to Berkshire Hathaway's shareholders sitting here. We are all a bunch of undeserving people and hope we continue to be so.

Now, just the way lower interest rates can fuel stock market rallies, the vice-versa is also true. If interest rates start firming higher, it can play spoilsport to the unbridled global stock market bull run.

In fact, the market correction we witnessed in February-March this year can be attributed to the rising yield on the 10-year US Treasury bond.

In a note to his Insider readers at the end of January 2018, Ankit Shah, Research Analyst, had raised a warning flag about the rising yields on the benchmark 10-year US Treasury bonds.

With bond yields now breaching the 3% mark, and the Fed in the process of shrinking its balance sheet, you cannot expect the flood the liquidity to keep lapping up stock prices.

If interest rates go up further, foreign investors will either go slow on India or exit all together.

So, be careful. Don't take the abnormally high valuation multiples as the new normal. At the same time, don't exit the markets out of panic.

Moving on to news from stocks in the engineering sector. Larsen & Toubro (L&T) share price is in focus today after the company said that it plans to undertake an offer for sale (OFS) of L&T Technology Services' shares. The OFS will open for non-retail investors today, and for non-retail investors on Friday.

L&T plans to sell over 4.1 million shares of L&T Technology Services as part of the base offer, and additional shares up to 2.5 million shares in case of oversubscription.

The company has set a floor price of Rs 1,400 per share. L&T Technology Services share price is currently trading at Rs 1,440 levels after it opened the day down by 4%.

Currently, the promoters hold an 87.1% stake in the company. If the offer is fully subscribed, Larsen and Toubro's stake in L&T Technology Services will fall to 77.5%. The company said if the oversubscription option is exercised the stake may fall further to 75.1%.

The OFS will help the company meet the market regulator's minimum public holding norm.

L&T share price opened the day down 0.3%.

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