India benchmark shares fall as inflation woes overshadow RBI support measures

Indian benchmark shares slipped on Monday as investors analyzed the Reserve Bank of India's (RBI) recent efforts to bolster the rupee, amid apprehensions about soaring oil prices and a less-than-ideal monsoon. The Nifty 50 dropped 0.7% to 22,363.35, while the BSE Sensex declined 0.76% to 71,924.68. Both indices had ended their longest weekly losing streaks in 25 years on Friday after rebounding from multi-year lows, but Monday's early gains were short-lived.

Now, traders are eagerly anticipating domestic inflation data for more insights into the policy outlook, following the RBI's rate hike last week. According to Anita Gandhi, head of institutional business at Arihant Capital Markets, "Market sentiment remains hostage to crude prices and a weaker monsoon," as these factors could exacerbate price pressures, dampen near-term consumption, and ultimately hamper corporate earnings.

Foreign outflows and a busy primary market that has siphoned liquidity away from secondary stocks have overshadowed support from the central bank's measures and the largely resilient quarterly business updates, Gandhi noted. On the weekend, the RBI redirected oil firms' dollar purchases and tightened hedging rules, enabling the rupee to rebound 1% from near-record lows in its most significant rally in six months.

Despite US President Donald Trump announcing that Russia and Ukraine would cease energy attacks, Brent oil prices surged to $106, yet ongoing Middle East tensions kept prices high, negatively affecting India, a top oil importer. Twelve of the 16 major sectoral indices managed to advance. Small-cap and mid-cap stocks rose 1.4% and 0.1%, respectively, buoyed by strong domestic fund inflows.

However, the banking and IT indices fell 0.6% and 0.8%, respectively, after gaining 1.4% and 3% on Friday. Apollo Hospitals plummeted 3.2%, Max Healthcare slipped 2%, and Medanta dropped 0.3% following the Supreme Court's query about the government's capability to control the drug market, raising concerns over high mark-ups. Avenue Supermarts, a D-Mart operator, declined 4.3% following brokerages' warnings of margin pressure following its September-quarter results.

Tech Mahindra slipped 2.9% owing to concerns that increasing competition from satellite-based mobile services could curb telecom spending.