Benchmark indices rebounded sharply on Monday after opening negative, tracking weakness in global markets ahead of the US Federal Reserve meet this week. Markets have been skittish ahead of the Fed meet because it is expected to announce an interest rate hike of 50 basis points (bps). Low-level buying in banking/financial stocks and improving macro-economic data led to a sharp rebound from the day’s lows on Monday, said market watchers.
After falling 648 points intra-day, the Sensex ended lower by 84.88 points, or 0.15%, at 56,975.99, while its broader peer the Nifty-50 ended lower by 33.45 points or 0.20%, at 17,069.10. Among Sensex stocks, Titan Company, Wipro and Tech Mahindra were the top losers on Monday, falling 2% each, while gains in HDFC Bank (1.5%) and HDFC (1.3%) countered the losses in the session.
Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services, said, “Global as well as Indian markets witnessed some jitters as investors panicked ahead of rate hikes by central banks globally. The US Fed is expected to aggressively hike rates in its upcoming meeting. Further, China’s factory activity data signalled a steeper contraction in activity due to widespread Covid-19 lockdowns, which also dampened risk appetite. However, indices recouped most of its losses, as domestic macro data suggested the manufacturing sector saw faster growth amid high inflation in the month of April.”
Foreign portfolio investors (FPIs) further continued to sell, after having sold shares worth $2.2 billion in April, data from National Securities Depository (NSDL) showed. On Monday, FPIs sold shares worth Rs 1,853.46 crore in the Indian equity markets, while local institutional investors bought shares worth `1,951.1 crore, provisional data from exchanges showed.
The broader markets, however, underperformed the benchmark indices on Monday. The BSE mid-cap index ended lower by 0.4%, while the small-cap index fell 0.8% in the session. Sector-wise, Nifty Auto, Pharma, IT and Energy ended in the red on Monday, with the Nifty IT pack falling 1.5%. Moreover, the IT index has declined more than 13% in the month of April, amid muted results from top heavyweights and expensive valuations. Infosys and Tech Mahindra declined more than 16% and 17%, respectively, in April. Overall, out of the 3,644 stocks traded on the BSE, 2,266 declined on Monday.
Experts are of the view that the volatility in the markets is expected to continue further, amid policy meetings in the current week and the upcoming LIC IPO, which will attract a huge number of retail investors, leading to some liquidity drying up from markets. “The mega IPO of LIC would also open on May 4, 2022, which is expected to attract many retail investors to the equity market but could suck out some liquidity from the market,” said Khemka.