After outperformance in the previous week, broader indices performed in line with the main indices as they remained unchanged amid weak global cues, including high US bond yields due to higher-than-expected inflation, that dashed hopes of an early rate cut.
Concerns over rising tensions between Iran and Israel, rising crude prices, and a more expensive dollar also dented investor sentiment.
This week, the Nifty50 index hit a fresh all-time high of 22,775.7 on April 10, but ended the week flat at 22,519.40 . The BSE Sensex also touched a record high of 75,124.28 on April 9, but ended flat at 74,244.90 at the close of the week.
In the broader market, the BSE Smallcap, Midcap, and Largecap indices ended on a flat note.
Among sectors, the Nifty Pharma index was down 2 percent while Nifty PSU Bank and Media indices shed 1.5 percent each. However, the Nifty Metal index saw an uptick of 3 percent, Nifty Realty index added 1.5 percent, and Nifty Auto index rose 1 percent.
Foreign institutional investors (FIIs) increased their selling this week as they liquidated equities worth Rs 6,526.71 crore, while Domestic Institutional Investors (DIIs) bought equities worth Rs 12,232.61 crore.
"Investor expectations of a June rate cut were dashed by higher-than-anticipated inflation in the US, compounded by positive US employment and manufacturing data. Moreover, escalating geopolitical tensions in the Middle East, alongside supply concerns, have propelled crude prices upward, impacting the overall market sentiment. Meanwhile, gold prices experienced an uptick due to geopolitical uncertainty, increased central bank purchases, and heightened safe-haven demand. Consequently, emerging markets saw a late-week consolidation.
``Conversely, European markets demonstrated strong performance, buoyed by indications from the ECB (European Central Bank) suggesting a potential rate cut in the near term," said Vinod Nair, Head of Research, Geojit Financial Services.
"On the domestic front, FIIs are exercising caution given the subdued expectations for Q4 corporate earnings and the premium valuations of mid and smallcap stocks. Within the IT sector, consolidation persists due to lacklustre Q4 earnings amid slowdowns in spending and uncertainty surrounding US policy rates," he added.
"Profit-taking is evident in banking stocks, particularly in PSU banks, as the banking sector’s loan growth is moderating, and valuation has surpassed long-term averages. However, the auto and realty sectors are displaying resilience, driven by expectations of a strong earnings momentum.
``India's CPI (consumer price index) points towards a marginal increase in near-term inflation, and industrial production may show signs of moderation. Investors are closely monitoring Q4 earnings and geopolitical events, which are poised to shape the market direction. Largecap stocks are viewed as a safer bet amid heightened volatility, given their stable earnings outlook and valuation," he explained.
The BSE Smallcap index ended with marginal losses. Nonetheless, 25 stocks gained between 10-36 percent (see the table). These included Ramco System, Puravankara, Abans Holdings, Transformers and Rectifiers India, Dolat Algotech, Kolte-Patil Developers, HMA Agro Industries, Mangalam Cement, and HEG.
On the other hand, losers included Reliance Infrastructure, Reliance Power, Shiva Cement, Nitta Gelatin India, Centrum Capital, Jubilant Industries, Filatex India, Imagicaaworld Entertainment, Great Eastern Shipping Company, EKI Energy Services, and Spencer Retail.
Where is Nifty50 headed?
Prashanth Tapse, Senior VP (Research), Mehta Equities
The market was anticipating three-rate cuts by the US Fed this fiscal, but the recent higher inflation reading suggests that the wait for rate cuts would be longer than expected. The sell-off in the Indian markets was a knee-jerk reaction to the rising inflation and fading hopes of a rate cut in the near future.
A sharp rise in crude oil prices and the rupee's downward spiral also dampened sentiment. While the Indian economy is on a firm footing, negative news, especially from the global front, would at times halt the upward march of Indian equities.
Technically, bulls will heave a sigh of relief only above the 22,800 mark. Till then, it seems the bears are likely to rule the roost. The benchmark Nifty has strong support at 22,339-22,101 levels, and faces resistance at 22,810-23,100 levels.
Jatin Gedia, Technical Research Analyst, Sharekhan by BNP Paribas
The Nifty has closed below the lows of the previous three trading sessions on the daily charts, which indicates weakness. We believe the index is in the process of retracing the rise witnessed from 22,710–22,776, and has been consolidating thereafter. The next crucial support level stands at 22,370. On the upside, 22,620–22,650 shall act as an immediate hurdle.
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