Sensex and Nifty retreat as technology shares weaken

Mumbai's key stock indices fell on Tuesday as the performance of technology shares and rising crude oil prices dampened investor confidence ahead of the Federal Reserve's monetary policy decision. The 30-share BSE Sensex slipped 0.16% to 73,497.28, while the NSE Nifty 50 declined 0.06% to 22,738.55. Technology stocks suffered the most, with the Nifty IT index dropping roughly 1.8%.

Infosys shares dropped 2.8% after the company reduced its revenue growth forecast for the fiscal year ending in March 2027, prompting investors to reconsider earnings expectations. Tata Consultancy Services and HCL Technologies also declined as investors assessed the impact of slower growth expectations for outsourcing firms reliant on overseas corporate spending.

Brent crude oil prices hovered around $115 a barrel, close to a six-month high, due to attacks on Saudi Arabia that heightened worries about energy supplies and tensions in the Middle East. High oil prices pose challenges for India's economy, as the nation relies heavily on imported crude, which can raise transportation and manufacturing costs, complicate inflation control, and reduce profit margins for companies unable to pass on expenses to customers.

Investors are watching to see if higher input costs will affect corporate earnings this reporting period. The Federal Reserve's two-day policy meeting, starting on Tuesday, is also drawing attention. Financial markets expect the central bank to keep its benchmark interest rate steady at 3.75 to 4%. The policy statement and comments from Federal Reserve Chairman Kevin Warsh will be scrutinized for hints about future rate hikes, especially if persistent inflation demands further tightening.

Higher US interest rates can affect investment flows into dollar-denominated assets, potentially lowering foreign portfolio investments in emerging markets. Market sentiment was influenced by concerns about high crude prices, geopolitical instability, and the Federal Reserve's policy outlook. Despite Tuesday's declines, broader market performance remained relatively stable, with small-cap shares up about 1.7% and mid-cap stocks up around 0.5%.