Indian stock markets took a breather on Friday, halting a powerful two-session rally as global headwinds and reassessed expectations for US interest rates prompted investors to lock in profits. The benchmark indices, Sensex and Nifty 50, closed in the red, reflecting a cautious mood on Dalal Street.
Market Snapshot: A Day of Decline
The 30-share Sensex fell by 400.76 points, or 0.47%, to settle at 85,231.92. During the trading session, it had plunged by as much as 444.84 points. Mirroring this trend, the Nifty 50 decreased by 124 points, or 0.47%, closing at 26,068.15. This pullback came after a spirited rally of over 1% in the previous two days that had propelled the Nifty above the significant 26,000 mark.
A key indicator of market fear, the India VIX, surged by a notable 13%, signalling a sharp rise in volatility and underlying trader anxiety.
Behind the Downturn: Global Cues and Domestic Sentiment
Market analysts attributed the downturn primarily to weak international trends. Stronger-than-anticipated US non-farm payroll data have significantly dampened hopes for an interest rate cut by the US Federal Reserve in December. This shift in global monetary policy expectations has made investors worldwide more risk-averse.
Compounding the issue are growing apprehensions of a potential bubble in artificial intelligence (AI) related stocks, which has cast a shadow over investor sentiment across global equity markets.
Despite the negative closing, experts were quick to point out that the market remains perched near its all-time highs. This suggests that the day's movement was more indicative of cautious profit-taking rather than a widespread panic-driven selloff. The market is in a phase of temporary stagnation as participants watch external uncertainties and specific sectoral challenges.
Market Outlook and Analyst Perspective
Dharmesh Shah, Vice President at ICICI Securities, provided a nuanced outlook. He highlighted that the Nifty 50 has gained 0.6% over the week, defying a global correction that saw US, European, and Japanese markets fall by 5-8%. This underscores a relative outperformance by Indian equities.
Shah believes that a decisive close above the all-time high of ~26,300 could open the path for a revised target of 26,800 in the coming month. He identifies 25,600 as a strong support level for the Nifty. His positive stance is reinforced by a strong Q2 earnings season and improving macro indicators.
Key factors that the market will monitor closely include the potential US-India trade deal, upcoming GDP data from both nations, the trajectory of Brent crude oil prices, and the movement of the Indian rupee, which has depreciated to a new low.
From an investment standpoint, Shah recommends buying Adani Ports and Special Economic Zone Ltd in the range of ₹1,454-1,482, with a price target of ₹1,675 and a stop loss at ₹1,377.
