 "Domestic markets drop 1% from day's high amid sustained FPI selling")
India’s benchmark indices made positive strides for the second consecutive session on Wednesday, but sustained selling by overseas investors saw them erase their gains.
Global headwinds and foreign portfolio investors (FPIs) outflows outweighed the positive sentiment triggered by the Reserve Bank of India (RBI) signalling rate cut in its next meeting.
The 30-share BSE Sensex fell 167.71 points or 0.21 per cent to close at 81,467.1. The NSE Nifty dropped 31.20 points or 0.12 per cent to end at 24,981.95. In the intraday trade, it jumped 220.9 points or 0.88 per cent to hit a high of 25,234.05.
The indices fell intra-day after the RBI signalled that it was set to make its first rate cut in four years. RBI's monetary policy committee voted to keep the repo rate unchanged at 6.5 per cent but changed its stance to neutral.
FPIs sold shares worth Rs 4,563 crore amid tensions in West Asia and China’s uncertain outlook. Also, concerns around corporate earnings growth plateauing for the quarter ended September, further dented sentiment.
A recent note by Motilal Oswal Financial Services estimated that Nifty earnings would grow marginally by 2 per cent in the quarter ended September, the lowest in 17 quarters.
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There have also been concerns about the trajectory of US Federal Reserve (Fed) rate cuts after strong US jobs data last week.
Nonfarm payrolls in the US rose by 254,000, the most in six months, while the unemployment rate fell to 4.1 per cent, and hourly wages increased. The 10-year US bond yield rose by 0.7 per cent and was trading at 4.04 per cent.
Geopolitical headwinds and China's stimulus campaign are also keeping investors on the edge.
"We had a tepid first quarter, and the second quarter is likely to be more tepid, and markets have risen sharply between these two quarters. And the recent correction has hurt retail investors. Retail portfolios are bleeding because they have momentum stocks like the railway and defence stocks. The liquidity from retail is getting choked to an extent,'' said Ambareesh Baliga, independent equity analyst.
From now on, the earnings season and macro data from the US will determine the market's trajectory. The market breadth was strong, with 2,654 stocks advancing and 1,317 declining. More than half of Sensex stocks declined. Reliance Industries, which fell 1.6 per cent, and ITC, which fell 3.17 per cent were the biggest drags on Sensex.
"Markets are grappling with domestic and global challenges, and the upcoming earnings season may increase volatility. As expected, Nifty struggled to break through the resistance zone of 25,150-25,300, and a breach of the recent low near 24,700 could trigger a fresh downward move. On a positive note, the strength in IT and pharma stocks is encouraging. Still, traders should remain cautious during this corrective phase and adopt a hedged strategy,'' said Ajit Mishra, SVP -- research of Religare Broking.