Benchmark indices decline for third day ahead of RBI monetary policy

The benchmark indices declined for the third day in a row as investors turned cautious because of the hawkish tone in the minutes of the US Federal Reserve’s recent meeting and apprehensions about the Reserve Bank of India (RBI) monetary policy committee’s (MPC’s) decision on Friday.
 

The benchmark Sensex ended the session at 59,035, a decline of 0.9 per cent, or 575 points. The Nifty ended the session at 17,639, a decline of 168 points or 0.9 per cent. After hitting a two-and-a-half-month high of 60,612 on Monday, the Sensex has declined 1,577 points, or 2.6 per cent, in the last three trading sessions.

On Thursday, overseas investors sold shares worth Rs 5,009 crore, while domestic institutions invested Rs 1,775 crore.

The US Fed minutes showed that the central bank’s officials were committed to containing inflation and outlined their plan to shrink their balance sheet by $ 1 trillion a year. Moreover, the minutes revealed that many officials considered one or more half percentage point hikes as an appropriate measure if price rise failed to moderate.

The MPC of the RBI will announce its bi-monthly interest rate decision on Friday. Investors will keenly watch the bank’s revised growth and inflation forecast. The Russia-Ukraine war has led to a broad rise in commodity prices, further exacerbating global inflation.
 

“Markets will remain volatile on Friday as participants would react to the outcome of the MPC meeting. We expect MPC to maintain the status quo on rates. However, commentary on inflation and growth would be actively tracked. On the index front, a close below 17,700 may further decline towards 17,550 levels, however, resilience in the banking pack is certainly positive. Keeping all in mind, it’s prudent to stay light in the first half and let the markets stabilise,” said Ajit Mishra, vice-president –research, Religare Broking.
 

The market breadth was weak, with 1,714 stocks declining and 1,694 advancing on BSE.
 

“Nervousness spread to the broader markets today, reflected in the advance-decline ratio, which fell to below 1:1 after four days. Friday’s RBI MPC may not bring in any positive surprise, and hence there seems to be little build-up ahead of it,” said Deepak Jasani, head of retail research, HDFC Securities.
 

More than half of Sensex stocks declined. Titan fell 3.2 per cent and declined the most amongst Sensex stocks. Oil and gas sector stocks fell the most, with the sectoral gauge dropping 2.6 per cent on the BSE.