Indices slip nearly 1% on weak global cues

Indian equities slid close to a per cent on Monday amid profit booking and weak global cues.

The benchmark 10-year US Treasury yield was ruling above 4 per cent on Monday as investors recalibrated bets on the pace of interest rate cuts by the Federal Reserve.

Nifty opened positive but succumbed under selling pressure and closed near the day’s low, down 0.9 per cent at 21,513. The Sensex fell 0.93 per cent, or 671 points, to 71,355. The Nifty VIX, a fear gauge, rose 6.6 per cent to 13.5. Most sectoral indices ended in the red with banking, consumer goods, metals and commodities the key laggards.

Cash market volumes on the NSE were below ₹1-lakh crore, reflecting muted sentiments. The broader indices Nifty Midcap 100 and Nifty Smallcap 100 slid 1.1 per cent and 0.6 per cent, respectively.

“The market witnessed widespread selling as the euphoria over early rate cuts may diminish due to the better-than-expected non-farm payroll data from the US and the consequent rise in the US 10-year yield,” said Vinod Nair, Head of Research, Geojit Financial Services.

Nair believes that investors’ trade positions will be more inclined towards the upcoming result season in the near term. While the outset may be tempered by lower expectations in the IT sector, the overall forecast for earnings growth remains optimistic, projecting double-digit figures.

“Domestic equities saw profit booking ahead of key inflation data globally and start of corporate earnings this week. Better-than-expected US job data last Friday, led to concerns that the US Fed might delay the rate cut. In this context, the inflation data from US, China and India due this week will be of key importance,” said Siddhartha Khemka, Head-Retail Research, Motilal Oswal Financial Services.

Buying by institutions was muted on Monday with combined net purchases of ₹172 crore. FPIs have bought shares worth $786 million this month.

“Per empirical analysis, the markets, towards the end of a rate hike cycle, often end up under-pricing the risks of the rate-hike cycle and over-pricing the benefits of the upcoming rate cuts. When the Fed starts cutting rates, it is mostly due to the onset of a recession, a bear market, or some other financial or non-financial event that usually shoves the markets lower,” Elara Securities India said in a note.

Global peers

Global stocks slipped on Monday ahead of a busy week of inflation and economic data and amid the diminishing prospect of a cut in US interest rates in the first quarter. Stocks fell ahead of a corporate reporting season where robust results are needed to justify high valuations.

Among Asian peers, Hang Seng and Shanghai Composite were the key losers, down 1.88 per cent and 1.42 per cent, respectively.

“Nifty has formed a bearish engulfing pattern on January 8 and in the process formed a lower-top lower-bottom formation. A breach of 21,492 could lead to further weakness towards 21,365. On upmoves, Nifty can face resistance at 21,629,” said Deepak Jasani, Head of Retail Research, HDFC Securities.

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