Benchmark indices fell on Friday as higher-than-expected US inflation muddled the outlook for rate cuts in the US. The Sensex ended the session at 81,381, with a decline of 230 points, or 0.3 per cent, while the Nifty50 index ended at 24,964, a drop of 34 points, or 0.14 per cent.
During the week, Sensex declined 0.4 per cent, and Nifty fell 0.2 per cent. Both indices posted their second consecutive weekly decline. In 2024 so far, Sensex has posted two consecutive weekly declines on four occasions and Nifty on three occasions. The last time both indices declined consecutively for two weeks was in August.
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The core consumer price index in the US, which excludes food and energy costs, rose 0.3 per cent for a second month in September. And the three-month annualised rate advanced 3.1 per cent, the most since May. The US inflation figures present a pause in a string of recently released data that points towards moderating price pressures. It has rekindled debates about the magnitude of a rate cut by the Federal Reserve. Some analysts expect the Fed to go for a quarter-point cut in November but believe it won’t cut rates in its December meeting. The 10-year US bond yield rose 0.9 per cent and was trading at 4.09 per cent.
Concerns around corporate earnings growth plateauing for the quarter ended September further dented sentiment.
Tata Consultancy Services (TCS), India’s biggest IT services provider, reported a moderate performance on Thursday for the second quarter of FY25. Its net profit declined by 1.1 per cent. TCS’s stock fell by 1.8 per cent and was the worst-performing Sensex stock.
“Concerns of earnings downgrades in H2FY25 render Indian valuations difficult to sustain. However, the sustained flows into the domestic mutual funds, where monthly SIPs have set a new record of Rs 24,500 in September, will ensure that all FII selling will be easily absorbed by DII buying. This has been the trend in October so far,” said VK Vijayakumar, chief investment strategist, Geojit Financial Services.
Indian markets have been on a downward spiral amidst concerns of flows shifting to China and raging geopolitical tensions in West Asia. Going forward, the earnings are likely to determine the market trajectory.
“The market has been facing selling pressure on every rise, though resilience in key heavyweights has slowed the downward momentum. We recommend maintaining a cautious stance on the Nifty until it decisively surpasses the 20-day exponential moving average (DEMA), currently around the 25,300 level. With opportunities on both sides, traders should prioritise careful stock selection and effective trade management,” said Ajit Mishra, SVP, Research, Religare Broking.
The market breadth was positive with 2,143 stocks advancing and 1,751 declining. Half of the Sensex constituents declined. Apart from TCS, ICICI Bank, which fell 1.6 per cent, and HDFC Bank, which fell 0.7 per cent, were the biggest drag on Sensex. Metal stocks gained as investors are expecting China to deploy $283 billion in fresh stimulus to shore up its economy.
