Markets Wrap: Sensex, Nifty End 1% Down This Week Amidst RBI Policy, Macro Data

Sensex and Nifty 50 ended the trading week between August 7-11 with a drop of nearly a per cent as RBI's policy outcomes and key macroeconomic data dictated the sentiments. This would be the third consecutive bearish week for domestic equities. Global cues witnessed volatility on concerns over economic growth. Foreign institutional investors were broadly net sellers while domestic institutional investors were net buyers for most of it. Meanwhile, the rupee weakened against the US dollar and ended the week lower.

On Friday, Sensex ended at 65,322.65, down by 365.53 points or 0.56%, while Nifty finished at 19,428.30, lower by 114.80 points or 0.59%. The rupee ended at 82.8450 per dollar, depreciating by 0.16% alongside its Asian peers.

Further, foreign institutional investors (FIIs) sold Rs 3,073.28 crore worth of Indian stocks on August 11, while domestic institutional investors (DIIs) were net buyers with an inflow of Rs 500.35 crore on the day.

On Friday's market performance, Vinod Nair, Head of Research at Geojit Financial Services said, "The domestic market continued to experience selling pressure, with banking stocks extending their decline in reaction to the RBI's liquidity absorption measures. The escalating concerns about inflation further weighed down domestic market sentiments. Despite the US CPI coming in lower than expected and the UK GDP beating estimates, global sentiment remained unfavourable."

In the trading week that ended on August 11, Sensex tumbled by 499.32 points or 0.76%, while Nifty 50 shed 123.30 points or 0.63%. The rupee closed the week with a 0.12% drop against the US dollar index.

RBI has kept the policy repo rate unchanged at 6.505% while turning hawkish due to rising inflationary pressure owing to a spike in food prices. The central bank also maintained its 'withdrawal of accommodation' policy stance.

On the markets weekly performance, Nair added, "The Indian market experienced bearishness during the week that focused on economic data as inflation concerns dented domestic sentiments. The week began with moderate gains, led by strong performances in the pharma and IT sectors. However, uncertainties surrounding economic data releases and the RBI's policy announcement hindered substantial moves. Inflation worries resurfaced as the RBI raised their CPI forecast by 30 bps to 5.4%, increasing the potential for a prolonged rate-cut trajectory. Additionally, the RBI's move to manage liquidity through the incremental CRR impacted banking sector sentiment, albeit with a limited effect as expected. Global markets faced volatility due to weak signals such as declining Chinese exports and the rating downgrade of US small and mid-sized banks."

He added, "Despite lower-than-expected US CPI and better-than-anticipated UK GDP figures, global market sentiment remained subdued. Amid rising inflation concerns, investors are closely monitoring the domestic CPI data for July, which is projected to show a significant increase due to rising food prices."

For Monday's trading session, Ajit Mishra, SVP - Technical Research, Religare Broking said, "Apart from the continued underperformance from the banking majors, profit taking in other key sectors is adding to the pressure. Indications are pointing towards the possibility of retesting 19,300 in Nifty again. Traders should align their positions accordingly and focus more on risk management."

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