Sensex, Nifty snap 3-session losing streak as CAS recovery lifts indices

On Thursday, major Indian stock market indices, the Sensex and Nifty, ended in positive territory after a three-day losing streak, with the latter two benchmarks recovering from losses during the closing auction session. Despite crude oil prices rising to approximately $102 a barrel, the indices managed to finish in the black. However, the recovery was not without caution, as investors remained wary of elevated crude prices, geopolitical tensions, and inflation concerns.

Vinod Nair, Head of Research at Geojit Investments, noted that the prospect of synchronized monetary tightening had heightened as higher crude prices and prolonged geopolitical tensions raised concerns about energy-led inflation. Investors were now eagerly awaiting key US inflation data to gauge the direction of interest rates. Meanwhile, aggressive bond yields and the potential yen carry trade unwind due to expectations of a Bank of Japan rate hike and a stronger yen also kept capital flows into emerging markets under pressure.

Although the headline indices ended higher, broader market participation remained weak, with both the Nifty Midcap 100 and Nifty Smallcap 100 closing in the red, and the market breadth being skewed towards decliners. Within the Nifty 500 universe, 308 stocks ended lower, underlining the broad-based weakness beneath the benchmark recovery.

The most severely impacted sectors were metals and pharmaceuticals, while banking and consumer durables showed relative resilience. The Nifty IT index suffered its seventh consecutive loss. Of the 3,666 stocks that traded on the NSE, 1,466 advanced, 2,079 declined, and 121 remained unchanged. Notably, 125 stocks touched their 52-week highs, while 124 hit their 52-week lows.

Additionally, 127 stocks crossed the upper circuit, and 98 breached the lower circuit. Analysts suggested that relief buying and a potential decline in crude prices, along with a stronger rupee and improved FII flows, could pave the way for a more sustainable market recovery.