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Domestic equity benchmarks fell for the fifth straight week, marking their longest weekly losing streak in 15 months. As global markets remained cautious on Friday ahead of Federal Reserve (Fed) Chair Jerome Powell's speech at Jackson Hole, renewed inflation concerns at home contributed to a risk-off sentiment.
The Sensex closed the session at 64,886, reflecting a decline of 366 points or 0.6 per cent. The Nifty50, meanwhile, ended the session at 19,266, falling 121 points or 0.6 per cent. Over the week, the Sensex and the Nifty50 declined 0.1 per cent and 0.2 per cent, respectively, equalling their most extended weekly losing streak since May 2022. In April 2020, both indices had fallen for seven consecutive weeks.
Investor sentiment was dented after the Reserve Bank of India's (RBI) policy meeting minutes, released on Thursday after market hours, flagged near-term inflation risks. The RBI indicated that headline inflation would likely spike in the coming months due to supply disruptions caused by adverse weather conditions. The central bank further warned of risks stemming from the impact of a skewed southwest monsoon and upward pressures on global food prices owing to geopolitical hostilities.
"Domestic markets came under pressure after RBI meeting minutes showed concern over rising inflation and outlook over excess liquidity. Also, investors were cautious ahead of Powell's speech at the Jackson Hole symposium. We expect the Nifty50 to be in a narrow range due to a lack of positive triggers. Meanwhile, niche mid-cap and small-cap sectors will likely remain in action,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.
During the week, equities rose in the first three sessions, only to erase those gains in the last two days. Analysts have noted that further sell-offs could occur in the short term, depending on central bankers' hawkishness, both domestically and abroad.
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Meanwhile, in an attempt to revive its ailing economy, China eased its mortgage policies. These measures, however, failed to lift its equity markets.
"Nifty50 has breached the crucial support of short-term moving average, i.e. 50 EMA on Friday, which indicates the tone to remain negative. We are eyeing 19,100 as the next support level. However, a mixed trend on the sectoral front would continue to offer trading opportunities on both sides so plan your trades accordingly,” stated Ajit Mishra, vice president, technical research at Religare Securities.
Despite the decline in the last five weeks, analysts believe that India remains the most stable market in Asia, underpinned by solid fundamentals and robust flows.
On Friday, the market breadth was weak, with 2,145 stocks declining and 1,494 advancing. Four-fifths of the Sensex stocks ended in the red. HDFC and ITC were the biggest drags on the 30-share index, slipping 1.07 per cent and 1.53 per cent, respectively. Capital Goods stocks fell the most, with its sectoral index on the BSE declining by 1.3 per cent.
