 "Indian equity markets, stock indices")
A combination of profit booking and nervousness among investors ahead of the US Federal Reserve's (Fed) monetary policy announcement led to a decline in indices on Friday.
The Sensex ended the session at 62,625 points, a drop of 223 points or 0.35 per cent while the Nifty50 ended the day at 18,563 points, declining 71 points or 0.4 per cent. Both indices, however, managed to eke out weekly gains of around 0.15 per cent each.
During the session, investors were cautious ahead of the monetary policy announcement by the Fed next week. A jump in jobless claims in the US, which has reached the highest level since October, has lent some credence to claims of a pause in rate hikes.
However, the surprise rate hikes by the central banks of Australia and Canada have added to the uncertainty.
The Reserve Bank of India, meanwhile, kept the rates unchanged this week while staying cautious on inflation.
Earlier in the week, the Bank of Canada surprised investors by raising its overnight lending rates to 4.7 per cent, the highest since 2001, and said that the economy was running too hot for its comfort.
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The Reserve Bank of Australia also raised rates and warned that further tightening might be required to ensure that inflation returns to its targeted levels within a reasonable time frame.
"So far, the belief was that the rates have peaked, and it is only a matter of time before the Fed cuts rates. The statements by the Fed officials of late have been hawkish, and they keep harping about bringing inflation under the targeted levels. It is in no one's interest to continuously hike rates, but a 25 bps (basis points) hike is not exactly on the table. And investors are hedging their bets accordingly," said UR Bhat, co-founder of Alphaniti Fintech.
Despite falling for two days in a row, new lifetime highs for the benchmarks remain in sight as the 30-share Sensex is just 1 per cent -- while the Nifty50 is 1.3 per cent -- away from creating new records.
"Overall structure remains positive, with Nifty gradually moving towards its previous lifetime high. Stock-specific action continues in the broader space, especially in the niche sectors. Next week, the market will focus on global central banks' rate decisions, where the market expects status quo. Also, investors should keep an eye on US and Indian inflation data,” said Siddhartha Khemka, head of research-retail, Motilal Oswal Financial Services.
On Friday, the market breadth was weak, with 1,862 stocks declining and 1,679 advancing. Close to two-thirds of Sensex stocks ended in the red. Infosys declined 1.3 per cent and contributed the most to index losses, followed by Reliance Industries, which fell 0.7 per cent.
Apart from what central banks do, the investors will also have one eye on the monsoon and the other on foreign portfolio investor (FPI) flows in the coming days.
According to provisional data from the exchanges, FPIs were net sellers to the tune of Rs 309 crore but so far in 2023, FPIs have been net buyers of Rs 39,047 crore.
"The opinion on the normalcy of the monsoons is divided. From now on, investors will also make bets factoring in the general elections of 2024 and the state elections before that in mind. The strong buying we witnessed in May is not being replicated this month. There have been bouts of selling," said Bhat.
