Market benchmarks the Sensex and the Nifty ended flat on May 5 as traders squared off positions a day after the RBI and US Fed raised rates.
RBI on May 4 hiked the repo rate by 40 basis points (bps) to 4.40 percent with immediate effect while the US Fed raised its benchmark overnight interest rate by half a percentage point, its biggest jump since 2000. As reported by Reuters, analysts at BNP Paribas expect the US Federal Reserve to hike interest rates by 50 basis points (bps) four times in succession.
Sensex opened in the green and rose almost 900 points in intraday trade, tracking positive global cues, but failed to hold altitude and ended 33 points, or 0.06 percent, up at 55,702.23. Nifty ended the day at 16,682.65, up 5 points or 0.03 percent.
“Markets erased most of their early gains due to profit taking in realty stocks, pharma and PSU banking stocks. The early momentum failed to sustain as investors turned risk averse amid worries of high inflation and prospects of more rate cuts that will slow growth going ahead. Another factor is investors are pulling out funds from secondary markets and infusing in the ongoing LIC IPO," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.
Mid and smallcaps underperformed as the BSE Midcap index closed 0.21 percent lower while the smallcap index fell 0.32 percent.
Among the sectors, BSE Power, IT and Teck indices rose almost 2 percent. On the flip side, realty index fell 1.6 percent while healthcare and FMCG indices fell up to half a percent.
Crude oil prices climbed over $110 a barrel mark while the rupee closed 16 paise higher at 76.26.
In the 30-share pack Sensex, 14 stocks ended in the green. Shares of Tech Mahindra (up 4.07 percent), Infosys (up 3.21 percent), HCL Tech (up 2.76 percent) and Wipro (up 1.87 percent) ended as the top gainers while IndusInd Bank (down 4.32 percent), Nestle (down 2.76 percent), UltraTech Cement (down 2.58 percent) and Sun Pharma (down 2.54 percent) ended as the top laggards.
"The fear of an aggressive rate hike by the Fed was the prime reason for global volatility during the past few days. Fed’s decision to remain less hawkish with a 50bps rate hike downplayed the investor’s worries, helping the global markets to rally. However, the domestic market trimmed its gains towards the end of the day following a sell-off in US futures," Vinod Nair, Head of Research at Geojit Financial Services observed.
Ajit Mishra, VP - Research, Religare Broking underscored with all major events behind us, the focus would return to earnings and upcoming macroeconomic data.
"We reiterate our bearish bias in Nifty and suggest continuing with the 'sell on rise' approach. Stocks, on the other hand, are offering opportunities on both sides so traders should align their positions accordingly," said Mishra.
Disclaimer: The views and recommendations made above are those of individual analysts and not of MintGenie.