Taking a breather after hitting record highs in previous sessions, Indian stock market declined on Friday, snapping their eight-session rally, amid weak global cues, as investors secured profits ahead of US payrolls data that could provide more cues on a shift in the US Federal Reserve's rate-hike plans. Sensex fell to 62,715 while the Nifty 50 index shed to 18,650 in afternoon deals.
“The key reasons for the fall in market is the correction in the US market, and we are falling because of that. Another reason for the selling pressure is the underperformance by auto stocks and private banks. Overall, market breath is good and mid and smallcaps performing now, earlier that was not the case. So this kind of profit booking is normal after an all-time high. The run-up was a little fast so after 8-9 up days, 1 some fall is fine," said AK Prabhakar, head of research at IDBI Capital.
The benchmark indices Sensex and Nifty have surged to record high levels this week as foreign institutional investors (FIIs) doubled down on Indian shares in November 2022.
“A major market positive that has helped equity markets globally during the last several days has been the steady decline in the dollar index and US bond yields. This trend continues. The dollar index is now below 105 and the US 10- year bond yield is around 3.43 %. Another important data is the declining manufacturing activity in the US in November," said V K Vijayakumar, chief investment strategist at Geojit Financial Services.
Meanwhile, global stocks were subdued as optimism over signs the Federal Reserve may temper its aggressive interest rate hikes was replaced by worries the economy might be headed for a recession.
“This negative economic news is paradoxically positive news from the market perspective since it indicates that the US economy is responding to the monetary tightening by the Fed. Back home, even though there is momentum in our markets, valuations are at elevated levels. Scope for further PE expansion is limited. Therefore, the market is likely to consolidate around the present levels," he added.
Technical view
“From a short-term perspective, the momentum readings on the lower time frame chart have reached the overbought zone, which needs to cool-off. Such overbought situations generally lead to either a time-wise correction or a price-wise corrective phase in the short term. Hence, the risk reward to chase the index at current levels is not very favourable. But the broader markets have recently witnessed buying interest and are now showing some catch up move. Hence, at the current juncture it is better to book profits in the index long positions and focus on stock specific approach where one could get better returns in the near term," said Ruchit Jain, lead research at 5paisa.com.
