Benchmark indices opened lower on Thursday after the Reserve Bank of India raised the repo rate by 25 basis points and shifted its policy stance to “calibrated tightening” a day earlier.
Continued pressure from higher crude oil prices and foreign selling also weighed on sentiment, while investors turned their attention to corporate earnings, with TCS and Reliance Industries in focus.
The Sensex was at 72,440.59 at 9:22 am, down 198.11 points or 0.27%. The index opened at 72,668.00 and touched an early high of 72,693.97. The Nifty 50 was also trading lower, with the broader market coming under pressure after Wednesday’s RBI-led decline.
TCS, IT STOCKS BUCK THE TREND
IT stocks were among the few pockets of strength in early trade. TCS rose 2.48%, HCLTech gained 2.11%, Tech Mahindra advanced 1.82% and Infosys climbed 1.64%.
The gains come as investors turn their focus to the September-quarter earnings season. TCS is scheduled to report its quarterly results today, making the stock a key focus for the market.
The Nifty IT index rose 1.96% in early trade, making it the strongest-performing major sector.
RELIANCE IN FOCUS
Reliance Industries was trading marginally lower, falling 0.17% in early trade.
The stock remains in focus after gaining strongly over the previous two sessions. Investors are also watching the company ahead of the potential listing of Jio Platforms later this month.
The Nifty Oil & Gas index, however, fell 0.49% as crude oil prices remained elevated.
RBI RATE HIKE CONTINUES TO WEIGH
The market is still adjusting to the RBI’s 25-basis-point repo rate hike and its shift from a “neutral” stance to “calibrated tightening”.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the new stance could keep pressure on market valuations as fixed-income returns become more attractive.
“With two more rate hikes of 25bp each likely in this rate hiking cycle, there will be pressure on valuations rising from higher fixed income returns,” Vijayakumar said.
He added that continued FII selling and US 10-year bond yields above 5.3% could keep large-cap stocks under pressure.
CRUDE OIL REMAINS ABOVE $100
Brent crude was trading at $102.15 per barrel, up 1.95%, while WTI crude stood at $89.73, up 1.64%.
Elevated crude remains a concern for Indian equities as higher oil prices can add to inflationary pressure and put pressure on the rupee and corporate margins.
Vijayakumar said a sustained reversal in the market would require foreign investors to turn buyers, but there is currently no clarity on when that could happen.
BROADER MARKET UNDER PRESSURE
The broader market also opened lower. The Nifty 100 fell 0.38%, Nifty 200 declined 0.42% and Nifty 500 dropped 0.44%.
The Nifty Midcap 50 fell 0.80%, while the Midcap 100 declined 0.58%. The Smallcap 100 was down 0.55%.
Among sectors, Realty fell 1.22%, metals declined 1.10%, financial services ex-bank dropped 1.09% and consumer durables fell 0.53%.
The Nifty Financial Services 25/50 index fell 0.49%, while private banks declined 0.32% and PSU banks fell 0.34%.
MOST STOCKS IN RED
Among the major Sensex stocks, Bajaj Finance fell 1.51%, ITC declined 1.62%, BEL dropped 1.21%, Adani Ports fell 1.21% and Tata Steel declined 1.17%.
Maruti, M&M PowerGrid and NTPC were also lower.
On the positive side, TCS, HCLTech, Tech Mahindra and Infosys led gains, while Trent rose 0.49% and Sun Pharma gained 0.40%.
Vijayakumar said the recent preference for growth stocks over value stocks is likely to continue as FIIs keep selling large-caps.
“Growth stocks are being accumulated at high valuations while value stocks are languishing at fair valuations. Sustained selling in large-caps by the FIIs have contributed significantly to this trend,” he said.
He added that investors may need to remain patient, with value stocks offering opportunities over the longer term and fixed-income investments becoming more attractive in a rising-rate environment.
