Indian stock market was trading on a negative note on Thursday, as Sensex and Nifty snapped a four-session gaining streak. The indices traded with marginal losses after a hawkish tone from the US Federal Reserve raised expectations of a rate hike later this year.
Sensex trades flat, while Nifty 50 declined nearly 3 points to trade at 24,050 level on Thursday. This came even as India VIX, which measures volatility in markets, dropped over 1% to 13.19.
IT stocks led losses on Sensex, with Infosys, HCL Tech, Tech Mahindra and TCS dropping 1–2.5% each. Bucking the trend, Trent, BEL and L&T shares gained around 1% each. Broader markets, however, were in the green, with Nifty Smallcap 100 and Nifty Midcap 100 indices rising up to 0.3%.
Sectorally, Nifty IT dropped 0.75% to lead losses, while Nifty FMCG and Nifty PSU Bank indices gained around 0.4% each. The market breadth was positive, as 1,623 stocks advanced on NSE, while 763 declined and 125 remained unchanged.
The US Federal Reserve held interest rates unchanged on Wednesday, but a higher number of policymakers expected a rate hike in borrowing costs later this year amid growing concerns about inflation lodged above the US central bank's 2% target. In what was the first Fed FOMC meet under Chairman Kevin Warsh’s tenure, the American central bank acknowledged that inflation was “elevated relative to the Committee’s 2% goal”, which was attributed in part to “supply shocks that have driven price increases in certain sectors, including energy.”
The hawkish tone offset the impact of a continuing decline in oil prices below $80 per barrel after Iran and the US agreed to a peace deal.
What lies ahead?
The hawkish message sent by the new chief of the Fed, Kevin Warsh, was a bit unexpected since Warsh has been in favour of rate cuts and that was what President Trump wanted, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. “But persistently high inflation in the US left the FOMC with no choice but to send a hawkish message. The dot plot indicates a rate hike, possibly in October. The US 10-year bond yield rose to 4.46%, leading to a sell-off in the US markets towards the close,” he highlighted.
“Indian market will not be unduly influenced by developments on the Fed rate front. In the near term, the market will remain resilient, supported by the crash in Brent crude to around $78 levels. Rupee is stable at around 94.52 level. FII selling has tapered off as expected and yesterday FIIs turned buyers, though in limited quantity. Brent crude prices at around $78 level and stability in the rupee are big positives from the market perspective. Bank Nifty will remain strong with an upward bias,” he added.
Though yesterday’s rise lacked momentum, there were no signs of a premature end to upsides for which we had pencilled in 24,200 as the initial objective, followed by 24,300–24,600, said Anand James, Chief Market Strategist at Geojit Investments.
“That said, expect bears to dominate early in the day, followed by an attack on 24,000, but we will wait for a slip past 23,800 to abandon upside hopes. Alternatively, a pullback above 24,060 will signal a return to the upside trajectory,” he added.
