Indian equity benchmarks kicked off Thursday's trading session on a negative note, extending the recent weakness driven by currency concerns and foreign fund outflows. The benchmark indices, BSE Sensex and Nifty50, both opened in the red, reflecting cautious sentiment among investors.
Market Opening: Key Levels and Figures
At 9:19 AM on Thursday, the Nifty50 was trading at 25,956.40, down 30 points or 0.11%. The index struggled to hold above the 26,000 mark in early trade. Meanwhile, the BSE Sensex stood at 85,013.18, registering a decline of 94 points or 0.11%. This subdued opening follows a trend of volatility, with the Nifty having retreated approximately 340 points from its recent all-time high.
Analyst View: Opposing Forces at Play
Market experts anticipate range-bound movement in the short term, with focus squarely on the rupee's trajectory, signals from the Reserve Bank of India's (RBI) policy, and global trade developments. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, provided a detailed perspective on the current market dynamics.
He explained that the market is caught between two opposing forces. On the negative side, the sharp depreciation of the Indian rupee, exceeding 5%, and the RBI's stance of non-intervention to support the currency have been viewed unfavorably by Foreign Institutional Investors (FIIs). This has triggered a return to sustained selling by FIIs, applying downward pressure on the indices.
However, Dr. Vijayakumar highlighted a powerful positive factor: India's robust improving fundamentals. These include strong economic growth, controlled inflation, supportive government policies, and early signs of a recovery in corporate earnings. He emphasized that while currency-related concerns may dominate in the near term, the positive fundamentals are expected to prevail in the medium term, allowing the market to resume its upward trend.
"Therefore, this near-term currency-induced weakness can be used by long-term investors to accumulate high quality large and midcap stocks," he advised, suggesting a strategic buying opportunity for patient investors.
Global Cues and Institutional Activity
The local market opening contrasted with positive global cues. US stock markets ended higher on Wednesday, buoyed by expectations of an imminent interest rate cut by the Federal Reserve. This optimism spilled over into Asia, where equities mostly rose in Thursday's early trade following data suggesting a cooling US labour market.
In other asset classes, crude oil prices edged higher due to supply concerns after Ukrainian strikes on Russian oil facilities. However, overall weak market conditions capped the gains.
The institutional activity data revealed a clear divergence. Foreign Portfolio Investors (FPIs) were net sellers to the tune of Rs 3,207 crore on Wednesday. On the other hand, Domestic Institutional Investors (DIIs) provided counter-support, being net buyers of shares worth Rs 4,730 crore.
A significant development was in the currency market, where the Indian rupee weakened past the 90 mark against the US dollar, hitting a record low on Wednesday, adding to the macroeconomic headwinds.
In summary, while near-term pressures from FII selling and a weak rupee are weighing on sentiment, analysts believe India's strong economic foundation presents a compelling case for long-term investment, turning the current market dip into a potential accumulation phase for quality stocks.
