Equity benchmarks crashed nearly 4 per cent in the truncated week as weak global cues, rising concern over inflation, foreign fund outflows and a surprise interest rate hike by the Reserve Bank of India (RBI) weighted sentiment. Stock markets were closed on May 3 on account of Id-Ul-Fitr (Ramzan Id).
Following the selloff, investors’ lost Rs 11.80 lakh crore for the week ended May 6. The market capitalisation of BSE-listed firms dropped to Rs 255.17 lakh crore on Friday from Rs 266.97 lakh crore on April 29.
The 30-share BSE Sensex tanked 2225.29 points, or 3.90 per cent, to 54835.58 during the week gone by. Likewise, the 50-share NSE Nifty index slipped 691.30 points or 4.04 per cent to 16,411.25.
As many as 41 stocks in the Nifty index settled the week in the red. Apollo Hospitals Enterprises cracked the most 13.93 per cent. Eicher Motors (down 10.11 per cent), Bajaj Finance (down 10.02 per cent), Titan Company (down 9.89 per cent), Bajaj Finserv (down 8.34 per cent) and Hindalco (down 8 per cent) stood among other major losers in the index. On the other hand, Power Grid, ONGC, Tech Mahindra, Hero MotoCorp and Coal India gained between 2 per cent and 5 per cent.
Overall, sentiment remained weak throughout the week as traders remained concerned over rising rate hikes, selling by foreign investors, increasing inflation and the Russia-Ukraine war. Markets made a pessimistic start to the week after the growth of eight core infrastructure industries slowed down to 4.3 per cent in March against 12.6 per cent in the year-ago period due to a decline in the output of coal and crude oil.
Meanwhile, markets extended losses after the RBI announced a surprise repo rate hike in an unscheduled meeting. RBI has increased the policy repo rate by 40 basis points to 4.40 per cent with immediate effect. RBI said core inflation is likely to remain elevated in the coming months, reflecting high domestic pump prices and pressures from the prices of essential medicines.
On the other hand, analysts believe that investors should keep a long-term horizon and accumulate quality stocks amid the ongoing fall in the stock market.
Vineet Bagri, managing partner, TrustPlutus Wealth, said, “Investors are worried that aggressive rate hikes by central banks to check inflation could hurt global growth. The markets are fearful that US Fed and other central banks would have to raise interest rates at a faster pace in comparison to what was planned to fight the inflation, which could push large economies into a recession.”
The 10-year US government bond has risen from 0.5 per cent in August 2020 to over 3 per cent now. In India, the benchmark 10-year government bond yield has increased from 6.8 per cent in July 2020 to over 7.4 per cent now. Bagri said that the increase in the risk-free rate in turn impacts equity valuations in the negative.
“The markets could consolidate in the near term after this correction. All eyes are on the Q4FY22 results. A good strategy at this point is to identify quality businesses and invest in them in small lots over the next few weeks,” Bagri added.
With a drop of 8.68 per cent, BSE Consumer Durables emerged as the top loser among the sectoral indices on the BSE. It was followed by Realty (down 8.02 per cent), Healthcare (down 5.85 per cent), Auto (down 4.95 per cent), Telecom (down 4.85 per cent). Metal, Bankex, Capital Goods, Information Technology, FMCG and Oil & Gas also declined somewhere between 0.40 per cent and 4.50 per cent. The BSE Power index (up 1.33 per cent) stood as the only gainer among sectoral indices.
In the forthcoming week, the market will first react to Reliance Industries’ quarterly numbers which are scheduled to be announced on May 6 later in the evening. Other prominent names include Aarti Drugs, BASF India, PVR, UPL, Asian Paints, Cera Sanitaryware, Cipla, Vodafone Idea, MGL, MRF, Birla Corporation, Petronet LNG, PNB, Relaxo Footwears, ICRA, L&T, Tata Motors, HAL, Tech Mahindra and Adani Ports will report their quarterly results next.
On the economic front, market participants will zero in on the data of the Index of Industrial Production (IIP), which is scheduled to be released on May 12, Industrial production in India grew 1.7 per cent year-on-year in February of 2022, advancing from an upwardly revised 1.5 per cent rise in the previous month. On the same day, the Consumer Price Index (CPI) for April also be released. The annual inflation rate in India increased to 6.95 per cent in March of 2022, the highest since October 2020.
Commenting on the further movement of the Nifty, Chandan Taparia, vice president, analyst-derivatives, Motilal Oswal Financial Services said, “The index formed a bearish candle on the weekly scale with the formation of lower highs from the last four weeks. Now till it holds below 16,666 zones, bounces could be sold for the weakness towards 16,200 and 16,000 zones whereas hurdles shift lower to 16,666 and 16,888 zones.”
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