Stocks decline more than 1%, Nifty slips below 18,000 mark

The Nifty fell by 1.03% to below the psychological 18,000 mark, closing at 17,914.15 levels. The Sensex shed 1.04%.

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All sectoral indices except for auto declined, with investors booking profits in banks, financial services, IT, infrastructure, realty and metal stocks, dragging them lower.

Bharti Airtel, State Bank of India, HDFC Bank and UltraTech Cement fell between 1.6% and 3%. Tata Motors gained 6% while Divi’s Lab gained 1.23%.

Caution also prevails as the market keenly watches Fed chair Jerome Powell’s speech and the CPI data to be released on Wednesday. “Powell is unlikely to depart from the Fed’s hawkish stance, but if the CPI data of Wednesday confirms the declining trend in inflation, the market will get ahead of the Fed and will start pricing in a terminal rate below 5% and possible rate cuts by end 2023″, said V.K. Vijayakumar, chief investment strategist at Geojit Financial Services.

In the speech on Tuesday, Powell refrained from giving any clues on the outlook for interest rates, a day after the Fed officials signalled their hawkish stance.

On the other hand, if inflation continues to remain high, there can be a sell-off in the market discounting higher rates and a hard landing for the US economy, he added.

Experts said investors should exercise caution and wait for key information before making decisions. While Tata Consultancy Services Ltd’s earnings show sustained growth for the IT industry, some analysts predict a slight weakening in deal wins. The upcoming Infosys and HCL Technologies results will provide further insight into the sector’s near-term prospects. Concerns about near-term demand in the IT sector remain prevalent.

Deepak Jasani, head of retail Research at HDFC Securities Ltd, said that optimism over China reopening also faded.

China opening up will impart momentum to metals, said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd. Hindalco and Tata Steel gained a per cent and more on Tuesday.

Domestic equities have witnessed wild swings in the last few days as a series of events have kept investors on edge. Some volatility was also led by the cautious environment globally ahead of Powell’s speech, said Khemka. He expects the Nifty to move in a broader range ahead of various events like the release of US, India and Europe inflation data. However, the expectation of healthy earnings could cap the downside, Khemka added.

Meanwhile, foreign portfolio investors remained net sellers, having net sold ₹4,930.32 crore worth of equities till 9 January this year. They sold ₹2,109.34 crore worth of equities on Tuesday.

They also raised bearish outstanding bets on Nifty and Bank Nifty futures by selling 26,384 contracts for ₹2,454 crore. Their outstanding net shorts indicate they remain bearish on Nifty and Bank Nifty.

The rupee closed 57 paise stronger at 81.78 to a dollar, the strongest level since 5 December. Corporate inflows triggered the sharp decline, and once prices drifted below 82.10, dealer stops were hit, and prices accelerated downward, said Anindya Banerjee, vice-president of currency derivatives and interest rate derivatives at Kotak Securities Ltd. He now expects a broad range of 81.00 and 82.20 on the spot market.