scorecardresearchMarket Wrap: Sensex, Nifty fall on rate hike fears; mid, smallcaps outperform

Market Wrap: Sensex, Nifty fall on rate hike fears; mid, smallcaps outperform

Updated: 06 Feb 2023, 04:18 PM IST

Sensex closed 335 points, or 0.55 percent, lower at 60,506.90; Nifty50 ended with a loss of 89 points, or 0.50 percent, at 17,764.60.

Sensex, Nifty fell on February 6.

Sensex, Nifty fell on February 6.

Domestic equity benchmarks the Sensex and the Nifty ended lower on February 6, tracking weak global cues.

Renewed fears over a prolonged spell of Fed rate hikes hit markets across the globe after surprisingly strong US jobs data.

As per media reports, quoting Labor Department data, the US economy added 5,17,000 jobs in January, while the unemployment rate fell to its lowest level since 1969.

While this is good news on the macroeconomic front, it is a blow to hopes that the Fed will take a pause on rate hikes soon.

Strong macro numbers mean the Fed has space for further rate hikes. 

As per market observers, traders and investors now expect two more hikes this year, instead of the earlier expected one hike, which will push interest rates higher than the earlier expected levels.

Meanwhile, the meeting of the domestic central bank's Monetary Policy Committee (MPC) is underway. The RBI MPC is expected to announce a 25 bps hike in repo rates on February 8. However, the market will be keen to spot hints on the pause of hikes.

Sensex closed 335 points, or 0.55 percent, lower at 60,506.90; Nifty50 ended with a loss of 89 points, or 0.50 percent, at 17,764.60.

Mid and smallcaps, however, ended in the green, outperforming the benchmarks. The BSE Midcap index clocked a healthy gain of 0.75 percent while the Smallcap index rose 0.49 percent.

Crude oil prices traded volatile on concerns over slowing global growth. The dollar, on the other hand, jumped as expectations of a longer phase of rate hikes grew stronger. The rupee cracked 90 paise to end at 82.73 per dollar.

Top Nifty gainers: Shares of Adani Ports (up 8.63 percent), IndusInd Bank (up 2.49 percent) and BPCL (up 2.19 percent) ended as the top gainers in the Nifty index.

Top Nifty losers: Shares of Divi's Labs (down 3.58 percent), JSW Steel (down 3.03 percent) and Hindalco (down 2.81 percent) ended as the top Nifty losers.

Sectoral picture

Among the sectoral indices, Nifty Metal emerged as the top loser, falling 2.20 percent. Nifty IT (down 0.61 percent), Financial Services (down 0.41 percent) and Bank (down 0.30 percent) indices also ended lower.

Among the gainers, Nifty Media, FMCG and Realty rose about half a percent each.

Experts' views on markets

Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said while the sentiment has been sluggish over the past week or so, today's fall can be attributed to weak Asian cues and a cautious approach from the investors ahead of the RBI's credit policy.

Chouhan said selling was also triggered by a further strengthening of the dollar against the rupee, leading to weakness in metal, power and select banking stocks.

"Markets may continue to witness bouts of intraday volatility due to the lack of any fresh positive triggers in the global arena," said Chouhan.

"A strong job market in the United States pushed the global market lower on rate hike fears, as it offers the Fed more leeway in enacting stricter policy measures. This was in contrast to the recent rally in the global indices on the expectation that the economy is in its last phase of policy tightening," said Vinod Nair, Head of Research at Geojit Financial Services.

Nair added that the RBI’s policy announcement on February 8 will provide more colour on its future rate actions, which is expected to hike the rate by 25bps.

Technical views by experts

Chouhan observed that the Nifty hovered between the 17,700 to 17,800 price range. On daily charts, the index formed a small inside-body bearish candle which is indicating the continuation of a non-directional activity in the near future.

"For Nifty, 17,700 would be the key support level and below the same, the index could slip to 17,600-17,520. On the flip side, a fresh rally is possible only after the dismissal of 17,825 and above the same, the index could rally to 17,900-17,925,” said Chouhan.

Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas said Nifty traded in a sideways manner as the day progressed and ultimately formed an inside bar on the daily chart.

"Going ahead, 17,700 and 17,870 are key support and resistance respectively. The index has the potential to stretch towards the 18,000 mark as long as it stays above 17,700," said Ratnaparkhi.

Key market data

Top indices on February 6.
Some of the most active stocks in Nifty 500 index on February 6.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of MintGenie.

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First Published: 06 Feb 2023, 03:34 PM IST