Global recession fear was back to haunt investors and IT stocks toppled sharply, extending their losses which took a heavy toll on Indian markets on Friday. Both Sensex and Nifty 50 dropped a little over 1% each. Smallcap stocks witnessed heavy selling pressure in the broader market. A broad-based selloff was recorded across sectoral indices with IT stocks emerging as the biggest underperformer. On the other hand, the rupee gained against the US dollar as the focus shifted toward Fed's next meeting where a softer tone in rate hike is on the cards.
Sensex shed 389.01 points or 0.62% to end at 62,181.67, while Nifty 50 tumbled by 112.75 points or 0.61% to close at 18,496.60. The gains in FMCG stocks could not offset the sharp selloff in IT stocks. India's volatility index rose by nearly 0.6%.
Stocks like HCL Tech, Tech Mahindra, Infosys, Wipro, and TCS were top 5 bears by falling in the range of 2-7%. Also, the downside in heavyweight Reliance Industries dragged the performance. Other stocks that witnessed a steep drop are -- Ultratech Cement, Tata Steel, Bajaj Finserv, and Bajaj Finance. On the other hand, top gainers were Nestle, Titan, Sun Pharma, and Dr. Reddy's Lab surging by over 1-2%.
In the broader market, on BSE, the SmallCap index slipped by 1%. On the sectoral indices, the IT index dipped by 901.26 points or 2.98%. While some significant downfall was also recorded in capital goods and metal stocks which further added to woes.
Vinod Nair, Head of Research at Geojit Financial said, "Today's downfall in the domestic market was sparked by IT stocks extending their losses after warning of a potential slowdown in business on global recession fears. This was further aggravated by banks losing their grip as PSBs suffered heavy sell-offs. However, global bourses were largely positive, although the Fed is expected to raise interest rates by 50 basis points next week."
The domestic equities tumbled despite Asian peers rising with Hong Kong's Hang Seng emerging as the best performer as investors took comfort from China easing their strict COVID-19 restrictions. Also, the focus shifted toward US inflation data scheduled next week which is expected to provide some clarity on Fed's stance in the forthcoming policy.
At the interbank forex market, after gaining to a session of 82.0950, the rupee ended at 82.27 against the US dollar on Friday compared to the previous day's closing of 82.42 per dollar. However, overall in the week, the rupee finished lower by at least 1.2% as the dollar sustained due to demand from corporates. Although the dollar has corrected substantially ahead of Fed's next policy meet where a 50 basis point is expected by the street, however, lower crude oil prices have pushed oil companies to bet on the greenback throughout the current week.
This week, markets have been on a volatile note broadly even after RBI reduced the size of the hike in repo rate to 35 basis points. Currently, the repo rate is at its highest level since August 2018 at 6.25%. The softer 35 bps rate hike could not lift the market as RBI continued to stay on the 'withdrawal of accommodation' stance -- indicating that the battle for taming inflation is not over yet.
Overall, in the current week, Sensex contracted by 1.09%, while Nifty 50 plummeted by 1.07% --- making it their biggest one-week fall since the week that ended 30 September.
On Nifty 50, going forward, Rupak De, Senior Technical Analyst at LKP Securities said, "On the daily chart, the index slipped below the recent consolidation, suggesting a rise in pessimism. Besides, the bulls failed to protect the 18,500. Going forward, the trend may remain negative with support placed at 18,350/18,200. On the higher end, 18,670 may act as a crucial resistance."