Nifty snaps 8-day winning run on weak global cues; Sensex falls 652 points

Fed remarks, China growth concerns hit sentiment

Hawkish comments from US Federal Reserve officials and renewed concerns about a growth slowdown in China halted the Nifty’s eight-day winning streak, with the 50-share index falling 198 points, or 1.1 per cent, to finish at 17,758 on Friday. The index, however, still managed to post its fifth straight weekly gains.

On Thursday, the Nifty had edged up for an eighth straight day of gains — its longest winning run since November 2020. The Sensex on Friday ended with losses for the first time in six days, dropping 652 points, or 1.1 per cent, to settle at 59,646.

Most Asian markets fell following concerns about China’s growth resurfaced as the country announced more fiscal stimulus. Goldman Sachs and Nomura cut their growth estimates for China’s gross domestic product (GDP), adding more uncertainty to the global outlook.

Recent statements by US Fed officials, reiterating their resolve to hike interest rates, also weighed on sentiment. James Bullard and Esther George, voting members of the Federal Open Market Committee (FOMC), emphasised the need to continue raising rates till inflation eased to the 2 per cent target.

“Following the release of the Fed minutes, domestic equities experienced profit booking amid weak sentiment from global peers. The minutes showed that even while decision-makers were concerned about the impact of aggressive actions, they were in favour of raising rates further,” said Vinod Nair, head of research at Geojit Financial Services.

The Fed had raised its benchmark rates in July by 75 basis points after a similar hike in June to tame inflation, which hit a 40-year high. 

Fed officials have signalled a 50-75-basis point hike in their September meeting, depending on data.

On Thursday, the market capitalisation of all BSE-listed firms had hit a new record high, which triggered profit-taking, said market players. From this year’s lows in mid-June, the benchmark indices have jumped 17 per cent, pushing valuations above their long-term averages.

Experts said the markets have gone up too fast, too soon, shrugging off some risks on the horizon.

“In our view, the market is ignoring potential bad news in the form of softer global GDP growth and weaker demand from a possible recession in the US and Europe, and higher inflation from likely spike in energy prices from possible imbalance in global energy supply-demand situation in the winter months in the northern hemisphere,” said strategists at Kotak Institutional Equities, led by Sanjeev Prasad, adding that valuations are “quite full” after the recent rally.

The Nifty currently trades at 22 times its estimated earnings for FY23.

The recent spike in the dollar has led to concerns that it might affect foreign portfolio investor (FPI) flows into emerging markets like India. The FPI flows in July and August helped the markets to erase the losses they made in the preceding three months. So far in August, FPIs have bought shares worth over Rs 44,000 crore.

On Friday, FPIs bought shares worth Rs 1111 crore, while their domestic counterparts sold shares worth Rs 1,633 crore.

Only four out of 19 sectoral indices of the BSE ended with gains, led by the BSE Power index, which rose 0.53 per cent. BSE Realty and BSE Bankex saw one of the biggest cuts.

The market breadth was weak, with 2,047 stocks declining and 1,361 advancing. Only six Nifty stocks ended with gains. Adani Ports gained the most at 4.44 per cent, while IndusInd Bank fell 4 per cent.