Indices snap 7-week winning streak; Sensex, Nifty dip despite Friday gains

Indian equity benchmarks rose on Friday amid gains in tech heavyweights, but ended the week with declines, snapping their seven-week winning streak.

The Sensex ended the session at 71,107, a gain of 242 points or 0.3 per cent. 

Nifty gained 94 points to end the session at 21,349, 94 points or 0.4 per cent. Both the indices declined 0.5 per cent during the week. 

In the preceding seven weeks, the Sensex gained 12 per cent and the Nifty 12.6 per cent, the first seven weeks of consecutive gains after December  2020.

Indian equity markets have been on an upward trajectory in recent times amid an easing global rate outlook, robust macroeconomic data, moderation in crude oil prices, and hopes of policy continuity in the Centre following the recently concluded state elections.

Profit booking after the excellent run was cited as the primary reason for this week's market rout.

"It was a bit of profit booking, there was more turbulence than in the recent past. But we usually get that in the year's end; people wanting to take some money out,” said Andrew Holland, CEO of Avendus Capital Alternate Strategies.

UR Bhat, co-founder of Alphaniti Fintech said a bit of profit booking after such steep gains is par for the course.

"You can't have markets going in one direction long. It's always a zigzag, even if it gains in the long term. There are also concerns about whether the recession will be around the corner and about the attacks in the Red Sea. It may not be as much of a worry as it used to be, but these flashpoints are a matter of concern," said Bhat.

Concerns about valuations, especially in the mid and small-cap space, after gains this year and the recent spurt in Covid-19 cases, the  Reserve Bank of India's tighter norms for lenders relating to making investments in units of Alternative Investment Funds (AIFs) have also been weighing on investors' minds.

The new RBI norms related to AIF investments led to a correction in banking and non-banking finance stocks this week. 

During the week, the Nifty Bank index fell 1.4 per cent, and the Nifty Financial Services index fell 1.5 per cent. India's active Covid-19 cases have stood at 328 in the past 24 hours, with the resurgence of the new variant.

 India's strong economic fundamentals will likely sustain the gains this year.

"It will be more of the same, but that does not mean markets can't go higher," said Holland.

The market breadth was strong, with 2,368 stocks advancing and 1,396 declining. More than two-thirds of Sensex stocks gained. 

Infosys, which rose 1.7 per cent, Larsen and Toubro, which rose 1.5 per cent, and HCL, which rose 2.8 per cent, were the biggest contributors to Sensex gains.

Foreign Portfolio Investors (FPIs) were the net sellers worth Rs2,829 crore, according to provisional data from the exchanges. 

For the week, FPIs have been the net buyers to the tune of Rs1,514 crore, and in December, they were buyers worth Rs44,740 crore.