Indian equities fell over 1 per cent on Friday on weak global cues, snapping a five-day winning streak and ending in the red after eight weeks of gains.
Global markets witnessed selling pressure after US Manufacturing PMI data showed contraction and a rise in initial jobless claims to an 11-month high, sparking concerns of a slowdown in the US. Back home, lacklustre first quarter earnings and broader market valuations weighed on sentiment.
The Sensex slid 1.1 per cent or 885 points to 80,981 on Friday. The Nifty was down 1.17 per cent at 24,717, after scaling 25,000 on Thursday. Cash market volumes on the NSE were down about 4 per cent. Smallcap index fell less than the Nifty even as the advance decline ratio was down to 0.59:1.
India’s VIX rose by 11 per cent at 14.41 levels, indicating increased nervousness in the market. Barring pharma, all sectors ended in red. Metals have been affected by weak results and higher imports harming domestic industries. Capital goods and real estate have been impacted by profit-booking, while the auto sector has suffered due to below-expected monthly sales figures.
FPIs sold shares worth ₹3,310 crore on Friday.
Signs of weakness
Vinod Nair, Head of Research, Geojit Financial Services, said: “The Indian market is showing signs of fatigue at higher levels, as most positive factors have already been priced in. Subdued Q1FY25 earnings and stretched valuations are not reassuring investors.”
Globally, economic growth is showing signs of weakness, compounded by escalating trade tensions, conflicts in West Asia and high inflation. Even as the US Fed is contemplating a rate cut in September, the BOJ has resorted to a rate hike, impacting the Japanese market. China is experiencing a slowdown in growth, necessitating additional policy measures to restore its economic momentum.
European shares fell more than 1 per cent on Friday, tracking a global risk-off sentiment following disappointing US growth data that sparked fears of a recession. Weak earnings outlooks from a few large tech companies have contributed to the negative sentiment.
A rout in Japanese markets deepened after the Bank of Japan struck a hawkish chord this week.
The RBI policy meeting next week could provide some hints towards an outlook on interest rates.
“Technically this market action is indicating a short-term top reversal pattern for the Nifty at the new high of 25,078 levels. The unfilled opening down gap could be considered as a bearish breakaway gap, which is normally formed at the crucial top reversal patterns,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.