The Nifty snapped its six-day winning streak on Friday, while the Sensex ended lower after two consecutive days of gains amid concerns over increasing foreign portfolio investor (FPI) flows to China.
Losses in banking heavyweights HDFC Bank and ICICI Bank weighed on the markets but gains in Reliance Industries and IT majors Infosys and HCL Technologies helped mitigate losses.
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After gaining 3.3 per cent in the previous six sessions, the Nifty ended at 26,179, a decline of 37 points or 0.14 per cent.
The Sensex ended the session at 85,572, a drop of 264 points, or 0.3 per cent.
FPIs were net sellers to the tune of Rs 1,209 crore, and domestic institutional investors (DIIs) were net buyers to the tune of Rs 6,887 crore. The robust flows from DIIs were on account of the rebalancing of Nifty indices.
The gains in Chinese markets on Friday and the recent reports about Beijing’s efforts to revive its economy have led to speculation about its effect on FPIs flows to India.
Analysts said that of the top 45 emerging market (EM) funds, 80 per cent are underweight on China.
If these funds reverse their underweight position, more flows could go into China at India’s expense, they said.
Chinese equities trade at less than half the valuation of Indian markets, and the latest measures by China to boost its economy are seen as impactful, with the China markets posting their biggest weekly jump since 2008.
This week, China’s top leaders pledged to support fiscal spending and make efforts to stabilise its property sector.
They announced one-time cash handouts to residents facing economic difficulties and hardship and promised more benefits for the unemployed populace.
The BSE Metal index rose by 1.2 per cent on hopes that new Chinese stimulus measures will boost global demand for metals and commodities.
The Nifty IT index rose 0.4 per cent after the stock of their US-listed peer Accenture due to demand for its AI-related services. Analysts said an improvement in the demand outlook in the US can benefit IT firms.
“While a strong recovery in discretionary demand may take a few quarters, it is unlikely to worsen further, in our view. We expect revenue growth for large-caps to improve in FY26 first half. Interest rate cut cycle and a potential thaw in decision-making by US corporates post US elections in November 2024 could provide a fillip to demand,” said Nomura in a note.
The potential flow rotation of India into China could determine the market trajectory over the next few weeks, said experts.
Traders will maintain a light position ahead of the second quarter earnings season, they added.
“Following the recent impressive surge, the benchmark indices experienced a sideways movement as investors engaged in profit booking at elevated levels. Investors are looking forward to the second earnings report, anticipating an improvement in earnings outlook,” said Vinod Nair, head of research of Geojit Financial Services.
The market breadth was mixed, with 1,979 stocks advancing and 1,957 declining.
First Published: Sep 27 2024 | 8:48 PM IST
