Headline indices the Sensex and the Nifty ended lower on May 18, a day after witnessing sharp gains, as concerns over inflation, aggressive hikes and geopolitical tensions kept the risk appetite of investors fragile.
Uk inflation surged to its highest annual rate since 1982 in April raising fears that the world may see a prolonged phase of rate hikes by the major central banks.
As reported by Bloomberg, Federal Reserve Chair Jerome Powell said the US central bank will raise interest rates until there is “clear and convincing" evidence that inflation is in retreat.
"The Fed chair repeatedly stressed the need to curb the hottest inflation in decades during the roughly 35-minute interview, calling price stability “the bedrock of the economy" and acknowledging that some pain in achieving this -- including a slight rise in the unemployment rate, was a cost worth paying in order to achieve it," said the Bloomberg report.
Meanwhile, analysts said the geopolitical tensions may flare up as Finland and Sweden have applied to join the NATO- the world's biggest military alliance.
As per the news agency AP, NATO Secretary-General Jens Stoltenberg said on May 18 that the military alliance stands ready to seize a historic moment and move quickly on allowing Finland and Sweden to join its ranks after the two countries submitted their membership requests.
The persisting concerns for the market seem to have refused to fade away and every rise in the market is followed by a fresh wave of profit booking.
"The sharp rally in the previous session failed to add fizz in today's trades, as the market did not capitalise on the firm start and rather turned range-bound to end marginally lower. The rampant FII selling has been weighing on investors' minds, and worries about subdued growth going ahead due to rising interest rates are hurting the sentiment," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.
Sensex opened 236 points higher at 54,554.89 and touched an intraday high of 54,786 before succumbing to profit booking and ending 110 points, or 0.20 percent, lower at 54,208.53. Nifty50 closed 19 points, or 0.12 percent, lower at 16,240.30.
BSE Midcap index also fell 0.13 percent but the smallcap index ended in the green with a gain of 0.33 percent.
Among the sector, BSE Realty fell 1.82 percent, emerging as the top sectoral loser. On the other hand, the FMCG index rose 1.21 percent to end as the top gainer among sectoral peers.
In the 30-share pack Sensex, 13 stocks ended in the green and 17 in the red. Hindustan Unilever, UltraTech Cement, Asian Paints, Sun Pharma and ITC ended as the top gainers in the index while Power Grid, Tech Mahindra, SBI, Larsen & Toubro and Bajaj Finserv ended as the top laggards.
Crude oil benchmark Brent Crude traded near the $115 a barrel mark while the rupee ended 2 paise lower at 77.58.
"UK’s soaring retail inflation number along with Fed Chair’s reassurance on bringing down the inflation, disturbed the sentiment, risking sharper rate hikes. With prospects of a sizeable interest rate hike by the global central banks, investors are advised to allocate higher weightage to sectors that are least affected by such policies like defensives," said Vinod Nair, Head of Research at Geojit Financial Services.
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