Sensex, Nifty decline ahead of India CPI data, weekly F&O expiry; energy, auto stocks drag

Broader markets faced selling pressure, with BSE Midcap and Smallcap indices falling 0.6 percent and 1 percent, respectively, after outperforming in recent weeks.

Sensex and Nifty edged lower by noon on December 12, weighed down by the impending expiry of weekly derivatives contracts and anticipation of India's inflation and industrial output data due later in the day. Adani stocks were in focus with sharp gains, led by Adani Green Energy, which topped the pack and boosted the conglomerate's market capitalization by Rs 27,000 crore.

At 12:15 PM, the Sensex was down 213 points or 0.3 percent at 81,312, and the Nifty was down 81 points or 0.3 percent at 24,560. About 1,164 shares advanced, 2,214 shares declined, and 84 shares remained unchanged.

"The range-bound consolidation construct of the market is set to continue. The bull run in the US is continuing unabated with (tech-heavy) Nasdaq setting a new record and closing above 20,000 on December 11," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

When it comes to sectoral performance, the Nifty IT index climbed over 1 percent, with all 10 constituents trading in the green. However, sectors like oil & gas, auto, and FMCG weighed on the market.

The IT index emerged as the standout performer, gaining over a percent, driven by in-line U.S. inflation data that bolstered expectations of a Federal Reserve rate cut next week. A potential Fed rate cut is a favorable development for Indian IT companies, which derive a substantial share of their revenue from the U.S.

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The Nifty Oil & Gas index dropped 0.5 percent, dragged down by declines in RIL, ONGC, and BPCL. Emkay Global noted in a November 17 report that the Indian City Gas Distribution (CGD) sector’s outlook has become murkier due to additional cuts in Administered Price Mechanism (APM) gas allocation by the government or GAIL.

The auto index slid 0.9 percent, dragged by Tata Motors, Maruti Suzuki, and Eicher Motors. The FMCG index declined 0.8 percent, with HUL, Tata Consumer, and ITC contributing to the losses.

Broader markets faced selling pressure, with BSE Midcap and Smallcap indices falling 0.6 percent and 1 percent, respectively, after outperforming in recent weeks.

"The mid-cap and small-cap space, which has shown significant momentum recently, now appears to be in the overbought zone," said Ruchit Jain, Vice President, Motilal Oswal Financial Services. "Adopting a 'buy on dips' strategy for mid-cap and small-cap indices might be more prudent at current levels," he added.

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The U.S. Consumer Price Index (CPI) for November rose 0.3 percent month-on-month and 2.7 percent annually, both in line with expectations, according to the U.S. Labor Department's December 11 report. The CME FedWatch Tool now indicates a 99 percent probability of a 25-basis-point Fed rate cut during the December 17–18 FOMC meeting.

On the domestic front, the upcoming CPI data will be critical in determining short-term market direction.

"Technically, on daily charts, the (Nifty 50) index has formed a small candle formation, which suggests indecisiveness between the bulls and the bears," said Shrikant Chouhan, Head of Equity Research at Kotak Securities. He believes that the current market texture is non-directional and perhaps traders are waiting for a breakout in either direction. He added that a breakout above 24,700 could push the index to 24,800, while a dip below 24,500 might trigger further selling, potentially testing 24,400–24,350 levels.

Adani Enterprises, Adani Ports, IndusInd Bank, Tech Mahindra, and Infosys led the Nifty 50 gainers, rising 1–2 percent. On the downside, Hero MotoCorp, HUL, NTPC, Apollo Hospital, and Tata Consumer fell 1.6–1.8 percent.

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