Stock markets gave up strong early gains on Thursday and ended lower as worries over possible RBI rate hikes, inflation risks and global uncertainty kept investors cautious despite softer crude oil prices and a stronger rupee.
The BSE closed 135.03 points lower at 75,183.36, while the NSE Nifty50 slipped 4.30 points to end at 23,789.00.
Markets had started the day on a strong note, with the Sensex rising over 500 points in early trade after crude oil prices fell sharply overnight following comments from US President Donald Trump that negotiations with Iran were in their “final stages”.
However, the rally lost momentum as investors turned cautious over the possibility of interest rate hikes by the Reserve Bank of India amid persistent inflation concerns linked to high crude oil prices.
Thursday’s session also coincided with the weekly derivatives expiry for the Sensex, which typically leads to higher volatility as traders roll over or close positions.
Both benchmark indices had climbed nearly 0.8% during intraday trade before paring gains.
Vinod Nair, Head of Research at Geojit Investments Limited, said domestic equities erased early gains as concerns over possible tightening and weak manufacturing data overshadowed optimism from falling crude prices.
“Domestic equities erased early gains as concerns over potential RBI rate hikes and weak manufacturing PMI data outweighed optimism from softer crude prices,” Nair said.
“Uncertainty around US-Iran negotiations, signals of possible domestic monetary policy tightening, and a weaker growth outlook continued to raise macro concerns,” he added.
One positive trigger for markets was the rupee, which posted its best single-day gain in nearly two weeks after remaining under pressure for several sessions.
The rupee had recently hit record lows amid rising crude oil prices and foreign investor outflows.
A stronger rupee usually supports investor sentiment as it helps reduce imported inflation risks for an oil-importing country like India.
Global crude oil prices remained volatile throughout the session.
Brent crude, which had fallen 5.6% overnight, traded near $104 per barrel on Thursday after Iran announced measures to tighten control over the Strait of Hormuz.
While oil prices cooled slightly, investors remained worried about supply disruptions and the possibility of prolonged geopolitical tensions in West Asia.
India imports nearly 90% of its crude oil needs, making elevated oil prices a major concern for inflation, the rupee and corporate margins.
Economists at Standard Chartered recently said the RBI could begin raising interest rates as early as June due to rising inflation risks linked to crude oil and the weakening rupee.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said the full impact of the energy crisis may become visible in the first quarter of FY27.
“The fourth quarter results have been, so far, good. The negative impact of the energy crisis will be felt in the first quarter of fiscal 2027. But if crude price continues to decline, the remaining quarters will be reasonably good,” he said.
Despite weakness in benchmark indices, broader markets showed resilience.
The Nifty Smallcap100 index rose 0.63%, while the Nifty Midcap100 index ended nearly flat.
Among sectoral indices:
On the other hand:
Among Sensex and Nifty stocks, IndiGo emerged as one of the top gainers, rising over 3%.
Trent, BEL, Adani Ports also ended higher.
ICICI Bank, Axis Bank and ITC provided support to the benchmarks.
However, IT stocks remained under pressure, with Infosys, Tech Mahindra and TCS ending lower.
Reliance Industries also slipped 0.72%, limiting the market’s upside.
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