Sensex, Nifty snap eight-day winning streak ahead of US jobs data

Both shed 0.6% but end in green for second straight week; Broader markets play catch-up

Indian equity benchmarks snapped their eight-day gains amid weak global cues ahead of the release of US jobs data. Investors also took some profits after the benchmark indices climbed to record levels, raising concerns over valuations.

The benchmark Sensex ended the session at 62,868, with a decline of 415 points, or 0.6 per cent. The Nifty closed at 18,696, falling 116 points, or 0.6 per cent. Both indices gained for the second straight week. The latest fall narrowed the weekly gain to less than a per cent. The broader markets outperformed during the week, with the Nifty Midcap index gaining 3.1 per cent and the Nifty Smallcap rising 2.34 per cent.

Global markets were weak as investors were awaiting US jobs data to gauge the direction of rate hikes. Reports suggested that the jobs report might indicate that the labour demand is ebbing but a bigger slowdown is necessary to contain wage growth that helped fuel inflation.

Moreover, recession fears in the US spiked after the factory activity data showed that American manufacturing contracted for the first time since May 2020.

"Declining manufacturing activity in the US is proof that the central bank’s policy tightening has started to show results, which in turn will encourage the Fed to keep rate hikes at bay," said Vinod Nair, head of research, Geojit Financial Services.

There are also signs of pressure on US corporate earnings with Salesforce becoming the latest firm to warn of slowing sales. Many US giants including Amazon have already announced job cuts.

In the preceding four sessions, the Sensex gained close to 4 per cent.

"Gains over the past few days are being digested and markets are looking at fresh data points to decide the further direction," said Deepak Jasani, head of retail research, HDFC Securities.

Hopes that the US Fed might go soft on their rate hikes and China might ease its COVID restrictions had fulled the gains in equities this week.

Apart from the jobs report investors will be keenly tracking the annual convention of the Chinese Communist Party's top decision-making body which is expected to outline the plan for COVID controls.

Brent crude gained during the week and ended Friday's session at $86 per barrel after OPEC's decision to cut crude supply by the most since 2020.

“Indications are in favour of further consolidation in the index but the tone would remain positive till Nifty upholds 18,300. And, since all the sectors are participating in the move, traders should utilize this phase to add quality names on dips,” said Ajit Mishra, VP - of Technical Research, at Religare Broking.

The market breadth was positive with 1,948 stocks advancing and 1,544 declining. More than four-fifths of Sensex constituents declined. Infosys declined 1.2 per cent and contributed most to the Sensex losses followed by HDFC which fell 1.3 per cent.

Foreign Portfolio Investors (FPIs) were net buyers to the tune of Rs 214 crore. Power stocks fell the most and its sectoral index on BSE fell 1.2 per cent. The auto index fell by 1.1 per cent.