Benchmark indices opened higher on Thursday despite the US Federal Reserve raising interest rates by 25 basis points, with domestic equities attempting to extend the previous session’s recovery. However, elevated crude oil prices, continued foreign selling and a busy primary market kept gains in check.
The BSE Sensex opened at 74,182.62 and was trading at 74,524.58 at 9:34 am, up 188.13 points or 0.25% from the previous close. The Nifty 50 opened at 23,195.25 and was at 23,298.40, up 80.80 points or 0.35%.
The Fed raised rates by 25 basis points in a unanimous decision, its first increase in more than three years. Its latest projections showed that 16 of 18 policymakers expect at least one more 25-basis-point rate hike by the end of the year.
IT stocks were among the key drags on the market. Nifty IT was down 0.58% at 9:36 am, as higher US interest rates could weigh on software demand and spending.
Among Sensex stocks, HCLTech fell 0.90%, TCS declined 0.82%, Infosys slipped 0.57% and Tech Mahindra dropped 0.47%. HDFC Bank was also down 0.75%.
At the same time, several heavyweight stocks supported the benchmarks. Eternal was the top Sensex gainer, rising 1.78%, followed by Bajaj Finance at 1.69% and BEL at 1.58%.
M&M gained 1.01%, Bajaj Finserv rose 1%, SBI advanced 0.75% and IndiGo was up 0.69%. ITC, Axis Bank, NTPC, L&T and Power Grid also traded higher.
The sectoral picture was broadly positive at the open. Nifty Auto rose 0.94%, while Nifty PSU Bank gained 1.29%. Nifty Financial Services Ex-Bank advanced 0.96%, Nifty Chemicals rose 0.69% and Nifty MidSmall Financial Services gained 0.54%.
Nifty Metal rose 0.49%, Nifty Realty gained 0.74%, Nifty Financial Services 25/50 advanced 0.52% and Nifty FMCG rose 0.24%.
On the other hand, Nifty IT fell 0.58%, Nifty Healthcare declined 0.27% and Nifty Consumer Durables slipped 0.23%.
The broader market was stronger than the benchmark indices. Nifty 100 gained 0.38%, Nifty 200 rose 0.42% and Nifty 500 advanced 0.47%.
Nifty Midcap 50 gained 0.54%, Nifty Midcap 100 rose 0.55% and Nifty Smallcap 100 climbed 0.86%.
India VIX fell 3.91% to 12.65, indicating lower volatility at the start of the session.
Brent crude was trading at $105.72 a barrel, down 0.10%, while WTI crude was at $102.27, down 0.16%.
Although crude prices eased slightly, they remain elevated amid continuing geopolitical and supply concerns. High oil prices remain a key risk for India as they can put pressure on inflation, the trade balance and the rupee.
Dr V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said the Fed’s rate hike was widely expected, but high bond yields could continue to weigh on equities.
“The Fed’s decision to raise rates by 25bp was completely on expected lines. There was no justification for a hold in rates in the context of elevated inflation and a resilient economy with only 4.1% unemployment,” Vijayakumar said.
He said the US 10-year Treasury yield, around 5%, remains a concern for equity markets. However, resilient US corporate earnings could provide some support.
“Indian market will continue to struggle. FIIs have been continuous sellers in India during the last six days and this trend is likely to continue,” he said.
Vijayakumar also pointed to geopolitical developments and US policy as additional concerns for Indian markets.
The Nifty’s immediate support remains around the 23,000-23,080 zone, while 23,300-23,450 is the key resistance area, according to Hitesh Tailor, Technical Research Analyst at Choice Broking.
With the market coming off a recent correction and technical indicators still in oversold territory, a rebound remains possible. However, sustained high crude prices, elevated US bond yields and continued FII selling could limit the upside.
Investors will also track the Fed’s commentary on the future path of interest rates, as this could have a bigger impact on global liquidity and capital flows than the 25-basis-point hike itself.
(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.)