Frontline indices the Sensex and the Nifty ended in the red for the third consecutive session on April 13 as investors remained cautious over rising inflation and commodity prices and their impact on the earnings of corporates.
India's retail inflation jumped to a 17-month high of 6.95 percent in March. Retail inflation is likely to remain on the higher side during the next few months thanks to the disruption due to the Ukraine war.
The elevated inflation can potentially make the RBI start raising rates as early as the next policy meet in June, analysts believe. BofA Securities sees a much higher likelihood of the RBI MPC raising the policy repo rate by 25bp in the upcoming June policy alongside turning the stance neutral.
"Though the global markets have already factored higher levels of inflation owing to high fuel and food prices, the unfavourable numbers dampened investor sentiments," said Vinod Nair, Head of Research at Geojit Financial Services.
"The ECB policy decision will be closely monitored for direction on how the central bank plans to balance slowing growth and record-high inflation. With the onset of the earnings season, the market is likely to be buoyed by sector-specific momentum," said Nair.
Sensex closed 237 points, or 0.41 percent, down at 58,338.93 while the Nifty settled 55 points, or 0.31 percent, lower at 17,475.65. Mid and smallcaps outperformed as the BSE Midcap closed 0.21 percent lower while the smallcap index rose 0.27 percent.
Since the market is closed on April 14 and 15, today's session marked the close of this week for the market. Sensex fell 1.86 percent and Nifty retreated 1.74 percent during this week. The BSE Midcap index fell 1.26 percent while the BSE Smallcap index fell 0.82 percent during the week.
Global cues remain weak as Russia's assault on Ukraine continues. As per a Reuters report, Russia is beefing up its forces for a new assault on Ukraine's eastern Donbas region. On the other hand, Covid curbs in China have raised fresh worries over the global supply chain disruption of consumer goods.'
Crude oil prices rose again led by the Ukraine crisis. Benchmark Brent Crude traded at over $105 a barrel. The rupee fell 4 paise to close at 76.18 per dollar.
As many as 20 stocks ended in the red while the remaining 10 ended in the green in the Sensex index. ITC, Sun Pharma, Hindustan Unilever, SBI and NTPC ended as the top gainers in the Sensex index while HDFC, HDFC Bank, Maruti, Dr Reddy's and Asian Paints ended as the top laggards in the Sensex index.
Bank, auto, finance and realty indices ended as the top losers among the sectoral indices while oil & gas, capital goods and FMCG indices ended as the top gainers.
"The onset of the earnings season, the release of key inflation data and the ECB policy meeting drove the market this week. Hyperinflation and the risk of elevated policy rate hike placed the global market on its toes impacting the performance of equities with rising yield," Nair observed.
"India’s CPI inflation which stood at 6.95 percent in March is expected to remain on the higher side in Q1FY23 but is expected to subside on hopes of a reversal of commodity prices and improvement in supply. With the start of the earnings season, the domestic market is also likely to be buoyed by sector-specific momentum in the coming days," said Nair.