Benchmark indices opened on a muted note on Thursday as weakness in information technology stocks offset the positive impact of sharply lower crude oil prices following the US-Iran peace agreement.
The S&P BSE was down 47.00 points, or 0.06%, at 77,108.62 in early trade, while the NSE Nifty50 managed to stay above the key 24,000 mark, rising 2.05 points to 24,087.75 as of 9:35 am.
The cautious opening comes after a strong four-session rally that saw the Sensex gain 4.5% and the Nifty rise 4% on easing geopolitical tensions and falling oil prices.
The biggest drag on the market was the IT sector, which came under pressure after the US Federal Reserve kept interest rates unchanged but signalled the possibility of a rate hike later this year.
Nifty IT fell 1.58%, making it the worst-performing sector in early trade.
Among Sensex stocks, Infosys dropped 2.40%, Tech Mahindra declined 1.58%, HCLTech fell 1.46% and TCS slipped 1.33%. These stocks were among the top losers on the benchmark index.
Higher US interest rates can hurt spending by global clients and reduce the attractiveness of emerging markets such as India, creating concerns for export-oriented IT companies that derive a significant portion of their revenue from the United States.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the market was surprised by the hawkish tone from the new Fed chief.
“The hawkish message sent by the new chief of the Fed, Kevin Warsh, was a bit unexpected. 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 US markets towards the close,” he said.
Despite the weakness in IT stocks, lower crude oil prices continued to support overall market sentiment.
Brent crude fell another 1.72% to $78.18 per barrel, while WTI crude declined 1.90% to $75.33. Oil prices have dropped sharply since the United States and Iran signed an interim agreement to end hostilities and restore shipping through the Strait of Hormuz.
For India, lower crude prices help ease inflation concerns, improve the current account balance and support the rupee.
Vijayakumar said Indian markets are likely to remain resilient because of these positive macro factors.
“Brent crude prices at around $78 level and stability in the rupee are big positives from the market perspective. FII selling has tapered off and yesterday FIIs turned buyers, though in limited quantity,” he said.
While IT stocks were under pressure, several sectors traded in positive territory.
Nifty Pharma gained 0.58%, Nifty Healthcare rose 0.51%, Nifty Realty advanced 0.47%, Nifty Chemicals added 0.44%, and Nifty FMCG climbed 0.36%.
Nifty PSU Bank rose 0.30%, while Nifty Metal gained 0.31%.
Among Sensex gainers, Trent rose 1.13%, BEL gained 1.05%, HDFC Bank advanced 0.72%, Larsen & Toubro added 0.55%, Sun Pharma climbed 0.40% and Adani Ports gained 0.35%.
The broader market continued to show strength despite the subdued benchmark performance.
Nifty Smallcap 100 rose 0.52%, Nifty Midcap 100 gained 0.10% and Nifty Midcap 50 added 0.11%.
India VIX, the market’s fear gauge, declined 1.13% to 13.04, indicating lower volatility and improving investor confidence.
Investors will closely track the US Federal Reserve’s policy outlook, movement in bond yields and foreign investor activity over the coming weeks.
At the same time, falling crude prices, a stable rupee and signs of easing FII selling are expected to provide support to Indian equities. The progress of the monsoon will also remain an important factor, as any prolonged deficiency in rainfall could raise concerns around food inflation.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)