Indian Stock Market Faces Continued Declines Amid FII Selling
Market Overview
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Mumbai, Sep 19: The Indian stock indices have experienced significant losses for the sixth week in a row, primarily due to ongoing selling by foreign institutional investors (FIIs) and worries about a sustained high-interest rate environment, which has made investors more cautious.
The Nifty index fell by 0.22% over the week but managed to gain 0.33% on the final trading day, closing at 23,346. Meanwhile, the Sensex decreased by 19 points, or 0.03%, finishing at 74,294, marking a weekly loss of 0.65%.
After a sluggish start, Indian stocks showed some recovery later in the week, aided by a decline in crude oil prices from their recent peaks.
According to an analyst, the policy decisions from the US and Japan were largely as anticipated, and the easing of energy inflation concerns helped reduce the inflation premium in sovereign yields, resulting in lower yields towards the end of the week, which provided some relief for equity valuations.
Nonetheless, the accompanying policy guidance indicated a continued tightening stance across major economies, suggesting that a prolonged high-rate environment is likely.
In this context, ongoing FII selling has put pressure on the rupee and limited the market's recovery, leaving domestic equities lower for the week, the analyst noted.
Mid and small-cap stocks outperformed their large-cap counterparts as investors shifted focus towards domestically oriented companies with better earnings visibility, robust order books, and solid balance sheets.
From a sector perspective, healthcare and FMCG sectors saw increased buying interest due to their defensive earnings profiles and connection to domestic demand.
On Friday, the real estate and metals sectors showed strength, while the IT sector continued to struggle, with the Nifty IT index dropping approximately 1%.
Mid and small-cap IT stocks, along with consumer durables, faced declines this week due to concerns regarding global technology spending and discretionary demand in a prolonged high-interest rate scenario, coupled with ongoing pricing pressures.
Looking ahead, the 23,000–23,100 range is viewed as immediate support for the Nifty, while the 23,400–23,600 area is seen as immediate resistance.
Market observers anticipate that domestic credit growth and PMI readings will serve as indicators of underlying economic activity in the upcoming week.
Additionally, initial jobless claims from the US and insights from Federal Reserve officials will influence expectations regarding the rate trajectory and global liquidity conditions.