Hawkish signals by US Fed end domestic market's eight-day winning streak

Nifty falls nearly a per cent after adding 4.5% in the last eight trading sessions

Hawkish signals by the US Federal Reserve (Fed) ended the Nifty50’s eight-day gaining streak on Friday. The 50-share index fell 0.9 per cent, or 166 points, to finish the week at 19,332 points. In the previous eight trading sessions, the index had added 831 points, or 4.5 per cent.

The Sensex, meanwhile, fell 505 points, or 0.8 per cent, to close at 65,280 points. The 30-share index had fallen by 33 points or 0.05 per cent on Wednesday. Despite the latest setback, the Sensex and the Nifty50 ended the week with a gain of 0.9 per cent and 0.7 per cent, respectively.

The minutes of the Fed’s most recent monetary policy meeting revealed that the US central bank had strong intent to increase interest rates further if warranted. Better-than-expected US private payroll data stoked fresh fears of a prolonged high-interest regime. Most Asia markets fell on Friday after the strong US jobs data triggered a sell-off on Wall Street overnight.

“The data points emerging from the US giving stronger indications of a likely rate action from the Fed in its next meeting led to a slump in the overseas markets on Thursday. There is a narrative that is emerging that inflation might be more persistent than it is thought to be at this juncture, going by the conditions that prevail in the US as also Europe, and the consequent rate action will be north-bound. This will have its impact causing some turbulence in the immediate term," said Joseph Thomas, head of research, Emkay Wealth Management.

In Friday's trade, 12 of the 15 major Nifty sectoral indices ended with losses, with the high-weighting IT and banks losing around a per cent each. Two Tata stocks ended among the biggest gainers -- Tata Motors and Titan. Adani Ports, Power Grid Corporation and Apollo Hospitals recorded the highest decline.

On the day, foreign portfolio investors (FPIs) bought shares worth Rs 790 crore lower than their daily purchases in the past few sessions. Domestic institutional investors (DIIs) sold shares worth nearly Rs 3,000 crore.

Overall, market breadth was weak with 1,413 stocks advancing and 2,050 declining. The extent of fall in the broader market -- mid-cap and small-cap indices -- was lower than the large-caps.

From their lows in March, the Sensex and the Nifty are up 14 per cent, propelled by sharp inflows from FPIs. In June, they pumped in Rs 52,366 crore ($6.4 billion) — the most since August 22. So far in July, they have invested more than Rs 20,000 crore ($2.3 billion). After pulling out Rs 17,000 crore in the first two months, FPIs have pumped in Rs 1.3 trillion into domestic equities since March.

The Nifty on Friday made an intraday high of 19,524. Technical analysts say the Nifty could run into resistance around 19,500 levels.

“Going forward 19,500 has become strong resistance for Nifty and unless that is taken out, traders should remain cautious. Support for the Nifty is seen at 18,900-19,000 band. Bank Nifty ended the week with a bearish “shooting star” candlestick pattern on the weekly chart, which is a short-term bearish trend reversal pattern,” said Devarsh Vakil, deputy head of retail research, HDFC Securities.