Benchmark indices traded on a muted note on Thursday as investors weighed the US Federal Reserve’s latest policy decision and its hawkish commentary, while gains in information technology stocks helped limit losses across the broader market.
At 9:21 am, the BSE Sensex was up 15.96 points, or 0.02%, at 77,670.56, while the NSE Nifty50 gained 22.25 points, or 0.09%, to trade at 24,272.45 after briefly touching an intraday high of 24,273.45.
Market breadth remained weak despite the benchmark indices holding firm. Eleven of the 16 major sectoral indices traded in the red, while broader markets underperformed. The Nifty Midcap 100 and Nifty Smallcap 100 declined around 0.3% each, while India VIX edged up 1.04%, indicating a cautious undertone.
The biggest support for the market came from information technology stocks, which extended their rally for a fifth consecutive session.
The Nifty IT index rose 1.87%, making it the best-performing sector in early trade. Infosys climbed 2.55%, Tech Mahindra gained 1.68%, HCLTech rose 1.37% and TCS advanced 1.28%, helping offset weakness in several heavyweight banking and consumption stocks.
Among Sensex constituents, Infosys emerged as the top gainer, followed by Tech Mahindra, HCLTech, TCS, Sun Pharma and Mahindra & Mahindra. On the other hand, Asian Paints fell nearly 3%, Adani Ports declined 2.75%, Eternal slipped 1.67%, InterGlobe Aviation (IndiGo) lost 1.17% and Axis Bank dropped 0.86%.
IT stocks continued to outperform as investors remained optimistic about the sector after the recent rotation away from AI-linked semiconductor stocks globally. Market participants also expect the Fed’s decision to keep interest rates unchanged to support corporate technology spending in the US, the biggest market for Indian IT services companies.
However, the Fed’s accompanying commentary kept investors on edge. While the central bank left rates unchanged as widely expected, Chair Kevin Warsh reiterated the Fed’s commitment to bringing inflation under control. The decision also saw dissent from three of the 12 voting members, an unusually high number that strengthened expectations that another rate hike could be on the table in the coming months.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the Indian market continues to show signs of a breakout, although several global headwinds remain.
“The Indian market construct indicates a breakout trend. But the potential breakout is being constrained by many headwinds. The spike in Brent crude again to near $90 following the escalation of the US-Iran conflict is a strong headwind,” he said.
Commenting on the Fed outcome, Vijayakumar said the split decision was interpreted negatively by global markets.
“Fed’s decision to pause rates yesterday, though expected, turned out to be negative for equity markets since the decision was a 9-3 split decision with three members voting for a rate hike to control inflation. This split decision indicates that a rate hike may come soon. Consequently, bond yields increased, impacting equity markets which saw a 2% selloff in the S&P 500,” he said.
He, however, believes India is relatively better placed.
“The Indian market is likely to respond differently since the selloff in chip stocks and FPIs turning buyers in India, so far in July, are turning favourable for the Indian market. KOSPI is down 31% during the last one month and FPIs have turned big sellers in chip stocks. The Indian economy continues to be resilient and this will provide fundamental support to the market,” Vijayakumar added.
Meanwhile, crude oil prices eased after Wednesday’s sharp rally. Brent crude slipped 1.26% to $89.60 per barrel, while WTI crude declined 0.95% to $83.66, offering some relief to inflation concerns even as geopolitical tensions in the Middle East continued to keep energy markets volatile.
