The domestic equity market witnessed across-the-board selling on April 7 in light of weak global cues as concerns over elevated inflation led by the Ukraine war continued keeping the risk appetite low even as investors awaited the RBI MPC outcome due on April 8.
Although there is widespread anticipation that the RBI will maintain a status quo on policy rates, investors fear rising inflation can force the central bank to change its stance and begin the process of policy normalisation sooner than expected.
Investors will focus on the growth and inflation forecast of the RBI. If that comes in line with expectations, the market may see some gains in the coming sessions, analysts said.
Concerns over economic growth and tepid quarterly earnings of India Inc have also started to surface. While the economy is showing signs of pressure owing to geopolitical issues and higher crude oil prices, higher input costs can dent the profitability of the Indian corporates. Meanwhile, many rating agencies have cut India's FY23 GDP forecast.
The Ukraine war which started on February 24 continues. The US and UK on April 6 announced fresh sanctions on Russia in retaliation for war crimes. Media reports suggested Ukraine wants more stringent sanctions to force Russia to end its war.
Crude oil prices traded a percent higher around 1600 hours IST while the rupee fell 20 paise to close at 75.96.
Sensex opened 208 points lower at 59,402.61 and touched the intraday low of 58,977.35 by falling 633 points. The 30-share index, eventually, closed with a loss of 575 points, or 0.97 percent, at 59,034.95. Nifty50 ended the day at 17,639.55 with a loss of 168 points or 0.94 percent. With this, equity benchmarks extended their losses into the third consecutive session.
Reliance Industries, HDFC twins, TCS, Infosys and Titan emerged as the top drags on the Sensex index. On the other hand, ICICI Bank, Axis Bank, Hindustan Unilever, Mahindra & Mahindra and Tech Mahindra supported the index.
Mid and smallcaps also suffered losses as the BSE Midcap and smallcap indices closed 0.42 percent and 0.75 percent lower, respectively, breaking their seven-day winning streak.
Among the sectoral indices, oil & gas and energy fell more than 2 percent each. Consumer durables, metal, power, utilities, teck, IT and industrials fell more than a percent each.
The overall market capitalisation of BSE-listed firms dropped to ₹271.3 lakh crore from ₹273.6 lakh crore on April 6, making investors poorer by ₹2.3 lakh crore in a single day.
"Negative sentiment continued for the third straight session as the US Fed's hawkish stance has raised concerns of steeper interest rate hikes going ahead while investors also trimmed their positions ahead of RBI policy, although most of the experts believe the MPC may maintain status quo on policy rates. The fall was largely due to profit-taking in Reliance Industries and other energy stocks amid volatility in global crude oil prices," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.
Vinod Nair, Head of Research at Geojit Financial Services pointed out volatility increased as the market approached the RBI policy meet outcome.
"The latest sectoral outperformers like metals, power and oil & gas sectors were the most hit including mid & small caps. If announcements are in-line with market expectations, like rates being unchanged, inflation forecast moderately increased and robust economic outlook maintained, then the market will trade positively considering corrections during the week and falling crude prices or else challenges will prevail," said Nair.
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