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India’s benchmark indices dropped on Friday, capping their third straight weekly decline amid a fall in finance and fast-moving consumer goods (FMCG) stocks.
The Sensex fell 365 points, or 0.6 per cent, to settle at 65,322 on Friday, while the Nifty50 index ended the session at 19,428, down 115 points, or 0.6 per cent, from the previous close. During the week, the Sensex declined by 0.6 per cent and the Nifty by 0.5 per cent.
Banking stocks contributed the most to the Sensex’s slide on Friday. HDFC Bank fell 1.05 per cent and was the biggest drag on the benchmark index, followed by ICICI Bank, which slipped 1.2 per cent.
The Reserve Bank of India (RBI) on Thursday directed banks to maintain an incremental cash reserve ratio (I-CRR) of 10 per cent, a move that will result in banks parking more funds with the central bank without earning interest. Moreover, the RBI raised its retail inflation target and flagged concerns about the food price outlook due to adverse weather events.
“The Indian market experienced bearishness during the week as inflation concerns dented domestic sentiment. The RBI’s move to manage liquidity through the incremental CRR impacted banking sector sentiment, albeit with a limited effect as expected,” said Vinod Nair, head of research at Geojit Financial Services.
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A hawkish statement by a Federal Reserve official and China’s debt woes added to investor concerns.
Mary Daly, president of the Federal Reserve Bank of San Francisco, said on Thursday that the Fed still had “more work to do” to combat rising prices. Meanwhile, news reports suggested that China would allow its provincial governments to repay the debt by raising about 1 trillion yuan through bond sales. Also, Country Garden Holdings, one of China’s biggest property developers, said it expected a multi-billion dollar loss in the first half of this year.
“The Fed official’s statement signals that they are not yet done with rate hikes, which is bad news for India and emerging market flows. And the hopes of China aiding a global economic recovery is fading with reports about a crisis in its real estate sector and faltering growth,” U R Bhat, co-founder of Alphaniti Fintech, said.
Investors will keenly track the remainder of the corporate results and high-frequency economic indicators in the coming weeks to gauge the market trajectory. The markets are expected to consolidate due to uncertain global cues.
“As the Q1 results season has come to an end, we could see a broad-based profit taking in the markets even as the global cues are also not helping currently,” said Deepak Jasani, head of retail research, HDFC Securities.
Market breadth was weak, with 2,094 stocks declining and 1,491 gaining. Foreign portfolio investors (FPIs) were net sellers of domestic stocks worth Rs 3,073 crore, while domestic institutional investors were net buyers at Rs 500 crore.
More than two-thirds of the Sensex stocks declined. Banking and FMCG stocks fell the most on Friday, and their sectoral indices on the BSE declined 0.73 and 0.72 per cent, respectively.
