First weekly decline for indices in 2 months as investors turn cautious

The benchmark indices clocked their first weekly decline in nearly two months, as investors turned cautious ahead of the start of the earnings season and polling for the general elections. 

The indices, however, rose on Friday boosted by gains in index heavyweight ITC. The Sensex gained 160 points, or 0.41 per cent, to close at 38,767, while the Nifty gained 47 points, or 0.4 per cent, to end at 11,643. 

Friday’s gains helped the indices pare losses for the week. The Sensex ended the week with a loss of 0.2 per cent, or 95 points. In the preceding seven weeks, the index had rallied 3,053 points, or 8.3 per cent.

Experts said the markets were consolidating after making solid gains. Future direction, they said, will hinge on the results and political trends. 

“The 2019 general elections and upcoming March quarter results will remain crucial triggers in the short term,” said Hemang Jani, head (advisory), Sharekhan. 

“On the earnings front we expect that a low base effect, turnaround in profitability of corporate lending banks, and healthy growth in earnings of energy companies, are all expected to largely drive aggregate Sensex earnings during the quarter.”

Market experts said sustained foreign inflows continue to provide solid support to the market. After pumping in Rs 42,500 crore in March, foreign portfolio investors (FPIs) have invested another Rs 3,000 crore into domestic equities so far this month. 

The surge in foreign flows comes after the US Federal Reserve announced that it had put interest rate hikes on hold to support the economy. On April 2, the Sensex hit a new record high of 39,057, surpassing the previous record touched seven months ago. 

The Nifty, on the other hand, climbed to a record high on intra-day basis but failed to surpass its previous high at close. On April 2, the 50-share index had ended at 11,713, slightly below its all-time high of 11,739 on August 28, 2018.

After surging 8 per cent in March, the markets have been choppy this month, amid investor caution. 

The India Vix index, a gauge for market volatility, had shot up to 21 during the week, the most since October, from the lows of 14 last month.

Technical analysts said the surge in Vix indicates that the markets will remain range-bound in the coming weeks. 

“A small negative candle was formed this week in the Nifty as per the weekly timeframe chart. Technical pattern signals a possibility of more range-bound action or minor down correction, before showing a sharp upside breakout of the recent all-time high of 11,761 in the coming weeks,” said Nagaraj Shetti, senior technical and derivative analyst, HDFC Securities.