Markets halt six-day winning streak; Sensex, Nifty 50 drop close to 1%

Sensex and Nifty fell nearly one per cent amid FPI selling, but managed to rise for the second consecutive week, supported by gains in auto and consumer stocks

Benchmark indices fell close to a per cent on Friday amid sustained selling by foreign portfolio investors (FPIs) and losses in index heavyweights HDFC Bank and Reliance Industries.

 

Investors were also cautious of a crucial last keynote address by US Federal Reserve Chair Jerome Powell at the central bank’s annual conclave at Jackson Hole, Wyoming.

 

Snapping its six-day gaining streak, the Sensex ended the session at 81,307, down 694 points or 0.85 per cent, while the Nifty dropped 214 points or 0.8 per cent to close at 24,870.

 

For the week, however, both the indices rose about a per cent, supported by gains in automobile and consumer stocks on optimism that the cuts in the goods and services tax (GST) will boost demand. Sentiment was also boosted by the S&P's recent sovereign rating upgrade. 

This was the second straight week of gain for the markets, which has come after six straight weeks of losses triggered by foreign portfolio investors’ (FPIs) selling.

 

Since July, overseas funds have accelerated their selloff of domestic equities. In August alone, they have withdrawn ₹25,751 crore, following ₹47,667 crore worth of share sales in July. However, this selling pressure from FPIs has been offset by robust domestic inflows. Domestic institutions have been net buyers  worth ₹66,184  crore so far this month and ₹60,939 crore in July.

 

The positive news flow over the past week has helped the markets gain around.

 

On August 15, the government proposed to simplify the GST structure into two main slabs of 5 per cent and 18 per cent, with a 40 per cent slab reserved for sin goods. This overhaul is expected to reduce the cost of many consumer products.

 

Combined with earlier income tax cuts announced in the Union Budget, these reforms aim to counteract the dual challenges of a consumption slowdown and the impact of US tariffs that currently stand at 50 per cent. Last week, S&P Global raised India’s long-term sovereign credit rating from BBB- to BBB for the first time in 18 years and simultaneously upgraded 10 financial institutions.

 

Looking ahead, the market trajectory will be influenced by the US tariffs on Indian goods scheduled to take effect next week and developments in the Russia-Ukraine peace negotiations, including their potential effect on additional tariffs. Investors will also closely monitor whether Powell maintains a cautious stance amid persistent inflation pressures or opts to ease to support a softer labour market.

 

“The July FOMC meeting showed a rare split, with two governors advocating a 25 basis point rate cut — the first dissent of this kind since 1993. Alongside a softer US jobs report, expectations for a September rate cut have strengthened, potentially benefiting emerging markets like India. We expect Indian equities to remain supported by optimism surrounding the GST 2.0 reforms and strong domestic macroeconomic fundamentals. Globally, clarity on US tariff actions against India and upcoming GDP data from both countries will shape investor sentiment,” said Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services.

 

Market breadth was weak, with 2,421 stocks declining and 1,662 advancing. HDFC Bank, down 1.3 per cent, and Reliance Industries, down 1.08 per cent, were the biggest drags on the Sensex.

 

“Friday’s movement in the Nifty indicates a consolidation phase. A decisive breakout above or below the current range will confirm the next directional move. The recent swing low of 24,535 is expected to provide immediate support, while 24,785 and 24,950 remain key resistance levels,” said Nandish Shah, Deputy Vice President, HDFC Securities.