Indian equity benchmarks ended the week on Friday with a cut of over 1% as US recession fears continued to hurt sentiments. Reserve Bank of India (RBI) raising the repo rate by 35 basis points (bps) to 6.25% has also dampened the sentiments. Selling on the final day of the week was the main spoilsport for Indian equity markets as traders opted to book profit ahead of the release of inflation numbers both in India and the US next week.
Pressure on the IT pack got elevated after Credit Suisse warned of valuation-led correction in the sector amid US macro headwinds. These signals led the BSE Sensex to decline 389.01 points, or 0.62 per cent, at 62,181.67 during the week ended December 09, while the Nifty slipped 112.75 points, or 0.61 per cent, to 18,496.1.
Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities, said: “FPIs have been net sellers of Indian equities during the week. Domestic markets reacted to 35 bps repo rate hike by the RBI MPC. The RBI MPC expressed optimism about growth but tackling inflation will likely be a key focus. Oil prices saw a sharp decline this week and that is positive for India. The impact of easing of Covid restrictions by China needs to be watched out.”
“In the US, the 10-year treasury yields have seen a steady decline over the past few weeks. The 10-year US treasury yield is now below 3.5% compared to a high of 4.22% in November 2022. Globally, markets are now awaiting US FOMC rate hike action and commentary in their scheduled meeting next week,” Chouhan added.
As many as 17 stocks in the Nifty 50 index delivered a positive return to investors in the week ending December 9, 2022. With a gain of (4 per cent), Hindustan Unilever emerged as the top gainer in the index. It was followed by Larsen & Toubro (up 3.4 per cent), Axis Bank (up 3.2 per cent), Asian Paints (up 2.7 per cent) and Nestle India (up 2.5 per cent). On the other hand, HCL Technologies, Tech Mahindra and Tata Motors declined 9.5 per cent, 7.1 per cent and 5 per cent, respectively.
Sector-wise, the BSE Fast Moving Consumer Goods index gained 2 per cent during the week gone by. BSE Capital Goods and BSE Bankex indices have also given more than 1 per cent return. While BSE Information Technology declined the most, 5.3 per cent and BSE Teck indices declined 4.6 per cent during the week. BSE Realty and BSE Healthcare indices also slipped more than 2 per cent.
Vinod Nair, Head of Research at Geojit Financial services, said: “After touching a record high, the domestic market experienced significant volatility due to the RBI meeting, global markets tumbled due to fear of an economic slowdown and worries over a Fed rate hike. The RBI raised policy rates by 35 basis points, as expected while remaining cautious and signalling a further rate hike in the upcoming meeting. The policy stance was maintained as “withdrawal of accommodation” to bring inflation within the target range while supporting growth. The GDP forecast for FY23 was brought down from 7% to 6.8% considering the spillover effect of the global economic slowdown. Crude oil prices dropped. However, while easing COVID curbs in China benefited the demand outlook, fresh sanctions on Russian oil further added volatility to global oil markets.
“The IT sector witnessed the highest profit booking after warning of a potential slowdown in business due to global recession fears. The market is currently trading at premium valuations; slowing earnings growth will impact market sentiment. The volatility in the market is expected to remain as we await the domestic and US inflation numbers, and the Fed’s interest rate decision next week. The FOMC is projected to raise interest rates by half a percentage in its final meeting of the year, which will take place on December 13-14, 2022,” he added.