Weekly market wrap: Nifty, Sensex ended in deep red amid selloff in global equities

This week key benchmarks ended in deep red, The 30-share Sensex declined 1.59 per cent to 58,840.79 on September 16 from 59,793.14 on September 09. Likewise, the 50-share Nifty index slipped 1.70 per cent to 17530.85. Nifty and Sensex tumbled below their respective psychological levels of 17,600 and 59,000, respectively, amid selloff in global equities after the release of the US inflation number for August. Rising concerns over possible aggressive interest rate hikes to tame high inflation triggered risk-off bets as traders also remained cautious after India’s gross domestic product (GDP) in the June quarter contracted 1.4 per cent quarter-on-quarter.

Bloodbath on final day of the week mainly played spoilsports for Indian markets as a number of agencies have revised down their forecasts for India’s economic growth after June quarter GDP data showed Asia’s third largest economy had expanded at a slower-than-expected 13.1 per cent from a year ago. Goldman Sachs trimmed its FY22 growth forecast for India to 7 from 7.6 per cent. Morgan Stanley said there is a downside risk of 40 basis points to its growth estimate of 7.2 per cent for FY23. Citigroup has slashed its FY23 growth projection to 6.7 from 8 per cent.

As many as 15 stocks in the Nifty index delivered a positive return to investors in the passing week. With a gain of 7.93 per cent, IndusInd Bank emerged as the top gainer in the index. It was followed by Power Grid Corporation of India (up 5.72 per cent), NTPC (up 3.72 per cent), Adani Ports and Special Economic Zone (up 3.46 per cent), and Maruti Suzuki India (up 2.72 per cent). Eicher Motors, Bharti Airtel, State Bank Of India, Bajaj Finance also advanced by over 1 per cent. On the other hand, Major IT stocks Infosys, Tech Mahindra and Tata Consultancy Services declined 8.90 per cent, 8.29 per cent and 6.49 per cent, respectively.

Vinod Nair, Head of Research at Geojit Financial services said, “Despite its strong decoupling scenario and encouraging macroeconomic data, domestic bourses succumbed to the global trend of rising bond yields and the dollar index as a result of rate hike fears in the global market. Fears of a recession in the global economy exacerbated selling pressure in IT and pharma stocks. Although the domestic CPI at 7 per cent indicates a rising inflation trend due to increased food prices, core inflation of 5.9 per cent and easing WPI inflation numbers offered some solace.”

Nair also added “A 15.5 per cent YoY increase in bank credits during August suggests that the economy is recovering rapidly. Mid and small caps are expected to continue their outperformance in the short to medium term as they are trading reasonably well compared to large caps and are at a discount to their historic valuation trend. On the global front, post the release of the US inflation data, which showcased a MoM increase in inflation, the global market has been pricing in the likelihood of a more aggressive policy response from the Fed in its upcoming meeting next week."

Sector wise, the BSE Power index gained 1.80 per cent during the week gone by. BSE Bankex and BSE Metal indices have also given positive returns. In contrast, the BSE Information Technology index declined the most 6.72 per cent, while BSE Teck, BSE Reality and BSE Oil and Gas index retreated 5.77 per cent 3.23 per cent and 2.93 per cent, respectively.

The coming week market participants will be eyeing the consumer price index for the month of August, slated to be released on September 20. Followed by the Foreign Exchange Reserves data to be announced on September 23, also the trend in investments by foreign institutional investors and the movement of rupee against the dollar will be also be closely watched by the market traders.

On the global front, investors would be eyeing few economic data from world’s largest economy, United States, starting with Existing Home Sales, Fed Interest Rate Decision, and FOMC Economic Projections on September 21, Fed Press Conference, Initial Jobless Claims on September 22 and finally S&P Global Services PMI Flash, S&P Global Manufacturing PMI Flash on September 23.

Market watcher S Ranganathan, Head of Research at LKP securities, said "Indian Markets today finally chose to mirror global cues after out-performing global peers in the recent past.  Weaker domestic flows for last month despite SIPs maintaining their run rate led to profit taking as all sectoral indices ended in the red. As global investors brace for a further interest rate hike post the US inflation data released recently, the RBI too has its task cut out in India when they meet at the end of this month. Spectacular Monsoon in India coupled with several positive tailwinds provides a plethora of investment opportunities in the broader markets."