In a continuation of its downward trend, domestic indices faced a fourth consecutive week of decline on August 18. Market sentiment was marred by apprehensions about global economic conditions and escalating food inflation. The week’s performance was notably influenced by weakening signals from international markets and the growing impact of rising US bond yields on currency markets worldwide.
The ongoing surge in US bond yields has triggered upheavals in currency markets, which have subsequently reverberated into equity markets. Concurrently, concerns about the prevailing macro-economic conditions, mounting domestic inflation, Foreign Institutional Investors (FII) divestments, China’s economic slowdown, and prospects of further US Federal Reserve interest rate hikes to address inflationary pressures have prompted investors to lock in profits.
Stock Market Landscape: IT Stocks Bear the Brunt
As the clock approached 12:40 pm, the BSE Sensex was recording a drop of 252.54 points (0.39%) at 64898.48. Simultaneously, the NSE Nifty was down 66.90 points (0.35%) at 19298.35. Interestingly, even small-medium stocks, which had exhibited strength earlier, faced weakness during the trading session. The Nifty Smallcap 100 and Nifty Midcap 100 indices marked a decline of 0.4% and 0.2%, respectively.
Notably, the most pronounced decline occurred in IT stocks during the trading session, followed by observable weakness in realty and oil and gas sectors. Conversely, a positive trend was noted in banking stocks, particularly in the public sector. Some media stocks managed to gather momentum as well. Among the Nifty gainers, Axis Bank and Adani Ports stood out, while Wipro, Tech Mahindra, and TCS faced losses.
Global Factors and Technical Insight
Despite a retreat from its two-month peak, the ongoing rally of the dollar remains a persistent concern for the Indian rupee. The rupee’s ability to hold onto its gains has been challenged by the robust performance of the dollar index. Reflecting the strength of the US economy, the 10-year bond yield in the US surged to 4.25%, reaching a 10-month high of 4.33% earlier in the week. This trend underscores apprehensions about sustained high US interest rates and potential future hikes.
Nifty’s technical view indicates movement within a narrow range of 200 points, oscillating between 19300 and 19500. The 50-day Exponential Moving Average (EMA) provides support on the downside, while the 20-day EMA poses resistance. Market expert Sameet Chavan from Angel One suggests vigilant observation of these levels for trading decisions, emphasizing the significance of global market signals in guiding market direction. Until Nifty breaks out of this range, its trajectory remains uncertain, underlining the importance of monitoring international market dynamics.