Markets were muted on Thursday, as the blue-chip stock indexes headed for their worst quarter since the early days of the pandemic, hit by fears that aggressive central bank policy aimed at curbing inflation could hurt the economy.
Nifty was up 0.13% at around 15,820 in early trade and Sensex advanced 0.22% to 53,141 on mild gains in bank and energy stocks. The rupee stepped back from record lows hit in the previous session and was trading at 78.93 per the dollar.
Still, the Nifty and Sensex were set for their worst quarter since the March quarter of 2020, with losses of around 9% each.
The Nifty Small Cap 100 and the Nifty Midcap index have lost around 19% and 10%, respectively, in the quarter.
Foreign investors have sold Indian equities worth $13.81 billion in the April-June quarter, the biggest outflow since at least 2008.
The Reserve Bank of India has hiked interest rates twice in the quarter - once out of cycle. More hikes are expected with inflation above the central bank's tolerance band for a fifth straight month in May, as crude oil and commodity prices surged following the Ukraine conflict.
"While the overheads of inflation and high interest rates are mostly priced in, any further rise in commodity and crude prices will remain a risk and a key monitorable for India," said Samrat Dasgupta, chief executive officer at Esquire Capital Investment Advisors.
"It is difficult to predict at this point whether interest rates and inflation have peaked or whether stocks have found the bottom."
Nifty Metal was the worst performer during the quarter, plunging around 26%, while Nifty Auto jumped nearly 12%.
Life Insurance Corp, which went public in India's largest initial public offering, has crashed around 22% since its May debut.