Despite the US Federal Reserve increasing rates by 0.75 basis points reiterating its hawkish stance, domestic stocks were relatively stable on Thursday compared with other global markets.

Benchmarks were volatile, but closed lower. After dropping 624 points, the Sensex staged a smart recovery and ended the session with 337.06 points or 0.57 per cent lower at 59,119.72. Similarly, the NSE Nifty went lower by 88.55 points or 0.50 per cent to end at 17,629.80. Equities across Japan (0.58 per cent), Hong Kong (1.6 per cent), Korea (0.63 per cent) and Australia (1.54 per cent) fell on Thursday after the US market crashed 1.7-1.8 per cent overnight.

The BSE MidCap and BSE SmallCap fared better falling 0.32 per cent and 0.47 per cent respectively.

However, analysts are cautioning investors as rupee hit an all-time low.

‘Risk remains high’

“Our equity markets had recently outperformed the global markets mainly due to the outperformance in the INR inspite of the rising Dollar Index. This move in currency above 80 certainly does not bode well for the equity market and hence, the risk continues to remain high in the near term,” said Ruchit Jain, Lead - Research,

Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities, said, “Indian stock market was able to sustain its resilience with limited cuts, but if the rupee continues its weakness, domestic market would turn less attractive for foreign investors in the short term, affecting performance.”

Foreign portfolio investors sold shares worth ₹2,509.55 crore, while domestic funds were buyers by ₹263.07 crore.

“The Indian economy faces headwinds from global forces such as geo-political tensions, rising financial market volatility, tightening financial conditions and recessionary concerns. The rise in repo rate coupled with the inflation is likely to impact the market in the near term,” said Mitul Shah, Head of Research at Reliance Securities.

Key challenges

Going forward, the key events for the markets include: Changes to growth and inflation forecast; comments around comfort on external balance sheet; and tone of the policy statement and path on rate normalisation, he added.

Among the sectoral indices, BSE Bank was the worst performer by declining 1.44 per cent, followed by Financial Services and BSE Energy. BSE FMCG, BSE Consumer Discretionary, Commodities, Auto and Industrials were among the gainers.