The benchmark indices got off to a strong start, with Sensex up nearly 570 points and Nifty near 24,400 as hopes around a sooner end to the Iran-US war, oil prices falling below $95, and other factors backed the bulls on Dalal Street.
However, the rally soon lost steam as benchmark indices erased all gains to close in the red. At close, Sensex was down around 123 points at 77,988.68 while Nifty 50 declined 34.55 points to close at 24,197. Smallcap and midcap indices on NSE, however, continued to remain in green, rising nearly 0.6-0.8% and outperforming benchmark indices. India VIX, which measures volatility in the markets, dropped 3% to 18.09.
HDFC Bank, Titan. Mahindra & Mahindra (M&M), Bharti Airtel, Kotak Mahindra Bank, Bajaj Finance, Hindustan Unilever (HUL) and HCL Technologies were the top losers on Sensex, declining nearly 1-2%. Bucking the trend, Zudio-parent Trent and Zomato-parent Eternal shares surged nearly 3% each to emerge as the top gainers.
Sectorally, Nifty Private Bank declined 0.56% to emerge as the top sectoral loser. Bucking the trend, Nifty Metal remained more than 1% higher, sustaining most of its morning gains. Around 1,089 stocks declined on NSE, while 2,147 advanced and 89 remained unchanged.
Thursdays mark weekly expiry for Sensex F&O contracts. Usually, such days are characterised by heightened volatility in markets. Profit booking may also have contributed to the sharp decline on Dalal Street after the benchmark indices recorded a sharp rebound in April so far after the incessant selloff in March.
Currency watch
Rupee rose 11 paise to close at 93.22 against the US dollar on Thursday, as against the previous close of 93.3725. The Indian currency has recovered after the raging war had sent it into a tailspin, pushing it across the historical mark of 95 against the US dollar before the RBI stepped in.However, caution is still warranted. “Lower crude, now slipping towards the $94–95 range, is easing pressure on India’s import bill and providing short-term relief to the currency. However, the situation remains fragile, as any setback in negotiations could quickly push crude prices higher again, reversing gains in the rupee. The currency continues to remain highly sensitive to developments around the Strait of Hormuz, which remains a key risk factor for global oil supply,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
FII’s negligible buying after massive selloff
Foreign investors remained net buyers of Indian equities on Wednesday, net purchasing shares worth more than Rs 666 crore. However, this is negligible when compared to the massive selloff by the foreign investors seen earlier. FIIs have remained net buyers for only two out of 30 consecutive sessions. They net sold Indian equities worth more than Rs 1.6 lakh crore between March 2 and April 9.
After the massive selloff, it is difficult to say whether yesterday’s slight net buying by foreign investors marks a decisive change in their behaviour or just the calm before another storm.
Back to the Middle East…
Hopes rise for an early end to the raging war between Iran and the US. Officials from the two countries are reportedly mulling a return to Pakistan in order to hold talks as early as this weekend, after the previous round of negotiations failed to culminate in a peace deal last weekend. Pakistan’s army chief and key figure in the mediation, Field Marshal Asim Munir, arrived in Tehran on Wednesday to try to prevent a renewal of the conflict.
“We feel good about the prospects of a deal,” White House press secretary Karoline Leavitt said at a news conference on Wednesday, calling conversations mediated by Pakistan “productive and ongoing.”
Meanwhile, Israel’s cabinet met on Wednesday to discuss a possible ceasefire in neighbouring Lebanon, a senior Israeli official cited by Reuters said, more than six weeks into its war with Iran-backed Hezbollah. A ceasefire could be announced soon, the Financial Times reported, citing Lebanese officials. Notably, the conflict in Lebanon was one of the key points for the failure in the previous round of peace talks, along with Iran’s nuclear ambitions.
Oil prices above $95/barrel
As a result of the rising expectations of an earlier end to the raging war in the Middle East, the skyrocketing rally in oil prices cooled down below $100 per barrel as investors increasingly hoped for normal traffic to resume through the Strait of Hormuz, a critical chokepoint whose closure has rattled global oil markets. However, after falling below $95 per barrel in the morning, Brent crude futures edged higher beyond $96 per barrel in the afternoon.
Global markets in green
Global markets remained broadly in the green, with Japan’s Nikkei jumping more than 2% to hit a fresh all-time high after erasing all losses recorded during the March selloff. South Korea’s Kospi also gained over 2% while Hong Kong’s Hang Seng gained over 1.9%. European markets hovered in the green with marginal gains.
On Wall Street, tech-heavy Nasdaq gained around 1.6% during yesterday’s session while S&P 500 jumped 0.8%. Dow Jones futures however are only marginally up today.
What lies ahead?
Following a gap-up start, Nifty slipped into the red as it failed to sustain above 24,300, leading to an intraday fall towards 24,100, said Rupak De, Senior Technical Analyst at LKP Securities. He noted that by the end of a volatile session, the index closed around the 50 EMA.
“The near-term sentiment remains uncertain, as the index failed to decisively clear the 24,300 resistance level. However, if it moves above 24,300 with conviction in the next session, a sustained rally could unfold in the near term. Otherwise, a sharp bout of profit booking may emerge, potentially dragging the index towards 24,000,” he further said.
The broader market once again outperformed the frontline indices, noted Sudeep Shah, Head – Technical and Derivatives Research at SBI Securities. Both the Nifty Midcap 100 and Nifty Smallcap 100 indices ended the session with strong gains of 0.63% and 0.89% respectively, reflecting sustained buying interest in the broader space, he said, adding, “The ratio charts of these indices compared with the Nifty are forming a clear pattern of higher highs and higher lows, suggesting relative strength. Given the current technical structure, midcaps and smallcaps are likely to continue their outperformance over the short term.”
Going ahead, the 24320–24350 zone is likely to act as a key resistance for Nifty, according to Shah. “A sustained move above 24350 could extend the pullback rally towards 24500, followed by 24650 in the short term. On the downside, 24080–24050 will serve as an immediate support zone for the index,” he said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)