Sensex takes breather after scaling 70k peak, ends 377 points lower

Nifty50 index slumps 91 points --- biggest single-day fall since November 1

The benchmark indices logged fresh highs on Tuesday before giving up gains as investors took some money off the table ahead of the release of US inflation data and interest-rate decision by the Federal Reserve.

After hitting a high of 70,034, the Sensex ended the session at 69,551, with a decline of 377 points, or 0.54 per cent — most since October 26.

The Nifty50 index finished at 20,906, down 91 points, or 0.43 per cent --- the biggest single-day fall since November 1.

This was only the second time that the Sensex and Nifty have ended with losses in the past 11 trading sessions, during which they gained by more than 5 per cent.

 

“Fed's policy outcome will provide some direction; until then markets are expected to consolidate. The IPO market is again in action with six IPOs in the pipeline,” said Siddhartha Khemka, head of retail research of Motilal Oswal.

Besides the release of key economic data, the two-day monetary policy meeting of the Fed got underway on Tuesday and a policy decision will be announced on Wednesday, where it is likely to keep the rates unchanged.

Investors will keenly track the comments of the Federal Reserve chief to check whether the US central bank will try to temper policy-easing expectations of equity investors.

The Fed and other central banks' announcement of their monetary policy decisions will likely confirm whether they still need more confirmation about whether inflation will ease further.

Meanwhile, the UK wage growth slowed at the sharpest pace in almost two years, signaling that the labour market is cooling.

The average earnings, excluding bonuses, rose 7.3 per cent in the three months through October compared with a year ago against 7.8 per cent in the period through September.

The Bank of England will announce its monetary policy decision on Thursday.

Indian equity markets have been on a relentless rise on the back of optimism about peaking rate hikes, robust macro numbers, and hopes of policy continuity amidst the comfortable win of the ruling Bharatiya Janata Party (BJP) in three state elections.

Analysts said the monetary policy announcements and macro data releases this week might point out the risk factors that could drag down the market going ahead.

"We are seeing time-wise correction in the index so far and expect the Nifty to hold the 20,700-20,800 zone in case the profit-taking extends further. Meanwhile, the focus should remain on identifying the sectors/themes playing out well and gradually accumulating those names on dips. Apart from banking and IT majors, we are seeing strong traction in themes like fertilizers, cement, and railways, to name a few, so align trades accordingly,” said Ajit Mishra, SVP-technical research, Religare Broking.

The market breadth was weak with 2,104 stocks declining against 1,691 advances. More than two-thirds of Sensex stocks were rejected.

HDFC Bank declined 0.98 per cent and contributed the most to the Sensex decline, followed by Reliance Industries, which fell 1.4 per cent.

Energy stocks declined the most, and their index on BSE fell 1.84 per cent.

Shriram may dislodge UPL in Nifty
 

Shriram Finance is seen replacing UPL in the benchmark Nifty50 index during the March rebalancing. Based on the free float market capitalisation on January 31, the National Stock Exchange will announce changes to its indices in February and the changes will become effective end-March. The Nifty Next 50 index is expected to see close to half a dozen changes, with Jio Financial Services, IRFC, PFC and Polycab seen as new inclusion candidates. Meanwhile, Adani Wilmar, Muthoot Finance and Procter & Gamble Hygiene & Health Care are at the risk of exclusion, shows an analysis by Nuvama Institutional Equities.
 

BS REPORTER