Indian equities snapped their three-session winning streak as benchmark indices - BSE Sensex and NSE Nifty - settled lower on Friday amid volatility in global technology stocks, a rebound in crude prices and profit booking after a sharp rally. Investors’ sentiments were also impacted by rising retail inflation which climbed to 6.09% in October, breaching the Reserve Bank of India's (RBI) upper tolerance limit of 6%.
The Sensex fell 318.56 points or 0.39% to settle at 81,592.45 on Friday, while the NSE Nifty 50 settled at 25,144.30, lower by 155.05 points or 0.61%. The benchmarks had earlier settled in the red in the special Muhurat trading session on Sunday (November 8) and before that on October 28.
Vinod Nair, head of research, Geojit Investments said that the rate hike fear is set to test the market rally, as rising inflation concerns and the possibility of further monetary tightening weigh on investor sentiment. He added that a rebound in crude oil prices and an uptick in both Indian and US bond yields indicate growing caution towards riskier assets, potentially limiting near-term market upside.
Brent crude, which fell below $90/bbl, was trading at about $96.31/bbl on Friday evening following attacks on Saudi energy infrastructure by Houthis and shipping disruptions through the vital Strait of Hormuz. The rupee depreciated to a provisional close of 94.20 against the U.S. dollar (down 8 paise for the day) on Friday.
Despite the concerns, FIIs poured Rs 5,736.55 crore (net purchase) on Friday, marking their 10th consecutive session of buying. Strong FII inflow, a rapid fall in oil prices during the past two weeks and robust Q2 earnings by corporate India helped Sensex and Nifty to advance around 12% in just two weeks.
Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services said that Indian equities are likely to witness marginal consolidation in the near term, while maintaining a positive bias and a gradual upward trajectory. He added that the rise in domestic retail inflation above the RBI's upper tolerance limit and crude prices moving back above US$95.4/bbl could weigh on sentiment in the near term.
“While these factors may temper the pace of gains, strong earnings delivery and continued FII participation remain supportive of the broader market outlook,” said Khemka. The Nifty Midcap 100 and Smallcap 100 declined 0.2% and 0.3%, respectively. Sectorally, all sectors ended in the red with Cement, Realty and Auto being the main laggards.