D-Street hits pause on Fed's rate cues; focus turns to trade deal

Mumbai: India's equity indices fell more than half a percentage point on Friday and closed lower for the week but logged the highest monthly gains of 4.5% since March.

The guidance by the US Federal Reserve signalling no further rate cuts this year and the US -India trade deal outcome led to investors turning cautious, dealers said. However, the declines can be used as buying opportunities, said analysts. The NSE Nifty retreated 0.7% to 25,722.10, down 155.75 points. The BSE Sensex ended at 83,938.71, 0.6% or 465.75 points lower.

Both indices are almost 2% away from their record closing levels hit late September last year.

Analysts said expectations on a trade deal between India and the US are building, and any delays in the announcement could dent investor sentiment.

Agencies

Indices retreat after 4.5% October surge; Fed’s move dents investor sentiment triggering ₹6,769 cr FPI selloff. Analysts see declines as buying opportunities

"The tariffs have capped the gains in the markets, and the worst of tariffs is expected to be over," said Gaurav Sharma, head of research, Globe Capital. "There can be further declines until 25,400 levels after the gains in the past few weeks, but the declines are buying opportunities."

Eternal emerged as the top loser on Friday and fell 3.5%. NTPC and Cipla declined 2.5% each.

The Nifty Media index dropped 1.3% while the Nifty Metal index fell 1.1%. The Nifty Healthcare Index dropped 0.9% and the Nifty IT index shed 0.5%. The Nifty PSU Bank index bucked the weak trend and gained 1.6%.

After the strong monthly gains in October, the declines are expected to be a pause before a rally that could propel Nifty towards an all-time high trajectory, said analysts.

"The broader market is also participating in the rally and 25,700 is the stop loss for traders," said Rajesh Palviya, head of technical and derivatives, Axis Securities. "As long as this level is intact, the November series is likely to see a fresh high led by banking and oil marketing companies."

Palviya said that on the domestic front, investors will take further cues from the earnings for the banking names expected this week.

The Nifty Mid-cap 150 and the Small-cap 250 indices declined around 0.5% each. Out of the 4,309 shares traded on the BSE, 1,722 advanced, while 2,436 declined.

In the past week, the mid-cap and small-cap indices climbed close to 0.7% and 0.6%, respectively.

Nifty is expected to rally toward a fresh high once a favorable outcome has been reached on the trade deal front, said Sharma. "However, until the outcome is announced, some volatility is likely driven by earnings season," he said.

"Auto stocks are expected to be in focus next week as the sales numbers will be out over the weekend," said Sharma. "IT stocks like Infosys, Coforge and Persistent Systems can offer a contra bet."

The US Federal Reserve indicated no further interest rate cuts this year on Wednesday which tempered investor sentiment as expectation of a revival in the foreign allocation to Indian equities faded away. "Global investors are pulling out funds now that no further rate cuts are expected by the US Federal Reserve," said Sharma. "However, the tide could turn significantly once the trade deal is announced as the propositions for beaten down Indian companies will change for the better once uncertainty is out of the way."

Foreign portfolio investors (FPIs) sold shares worth a net ₹6,769.3 crore on Friday. Their domestic counterparts bought shares worth ₹7,068.4 crore. In October, global investors bought shares worth ₹1,755.2 crore.