D-Street rally sputters on renewed rate hike worries

Mumbai: Indian equities resumed their downtrend on Thursday following a rebound in the previous session after eight consecutive sessions of decline as concerns over extended monetary policy tightening by central banks in the face of sticky inflation kept investors nervous.

Benchmark indices wiped out previous day gains, with the Sensex closing below 59,000 and the Nifty breaking below its 200-day moving average (DMA) of 17,397, a key technical indicator, led by declines in banks, technology, automobile and metals stocks.

The Sensex closed at 58,909.35, down 501.73 points, or 0.84% from the previous close. The Nifty declined 129 points, or 0.74%, to close at 17,321.90.

With Thursday's weak closing, the benchmark indices have fallen in the previous nine out of the 10 sessions, losing over 4% and erasing over ₹7.25 lakh crore in investor wealth.

"The wisdom that rate hikes will stop and then gradually decline has quickly changed towards a consensus of higher and prolonged rate hikes," said UR Bhat, co-founder & director, Alphaniti Fintech. "This will draw liquidity out of the market, resulting in more foreign fund outflows and putting downward pressure on equities in the near-term."

The views on inflation and the quantum of rate hikes are ever changing, and any positive development from the US or resolution in geopolitical issues such as Russia and Ukraine conflict could immediately turn the sentiments positive, said Bhat.

Foreign portfolio investors (FPIs) were net buyers on Thursday on account of large block deals in shares of Adani Enterprises. FPIs, who have been on a selling spree of late, purchased shares worth ₹12,770.81 crore, showed provisional data from stock exchanges. Domestic institutional investors also featured as net buyers of equities to the tune of ₹2,128.80.

"Foreign institutions continue to shift their trades to Hong Kong and China purely because of cheaper valuations ," said Abhilash Pagaria, head, alternative and quantitative research, Nuvama Institutional Equities.

"We expect the market sentiment in India to remain weak in the near-term, and see markets trading in a choppy manner over the next three-four months until foreign funds turn net buyers. Buying from domestic mutual funds is the only saving grace for our markets at the moment."