Sensex, Nifty off to a choppy start amid weak global cues

Indian benchmark indices opened flat on Monday, as gains in financial stocks were offset by losses in IT shares, amid weak global sentiment following Moody’s downgrade of the U.S. government’s credit rating on Friday.

The BSE Sensex shed 60.79, or 0.07%, to open at 82,269.80, while the NSE Nifty advanced 3.05 points, or 0.01%, to open at 25,022.85.

Among the 30-stock Sensex pack, shares of Infosys, Eternal, TCS, IndusInd Bank, HCL Technologies, and Reliance Industries were among the top losers, falling between 0.3% and 1.1%.

The decline in IT stocks followed Moody’s downgrade of the U.S. government’s credit rating to AA1 from AAA, citing elevated debt levels and interest costs "significantly higher than similarly rated sovereigns." As IT firms earn a sizable portion of their revenue from the U.S., the Nifty IT index slipped 0.8%.

In contrast, the broader markets outperformed, with the more domestically focused Nifty Smallcap 100 and Nifty Midcap 100 indices rising 0.8% and 0.4%, respectively.

Among individual stocks, Vodafone Idea dropped 3% after the telecom operator moved the Supreme Court to challenge the government’s denial of its request to waive over $5 billion in interest and penalties on statutory dues.

Bharat Electronics Ltd (BEL) rose 2% to a fresh 52-week high after the company posted strong Q4 earnings and secured additional defence orders worth Rs 572 crore.

Expert View

The prime mover of the ongoing rally in the Indian market is the sustained FII inflows of around 23,800 so far this month, said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, adding that the decline in global trade tensions, the rally in global markets led by the U.S. and the India-Pak ceasefire have also created the setting for this rally.

"FII inflows can continue, and the domestic mutual funds sitting on a huge cash pile will be eager to buy any dip in the market. This will impart resilience to the market even when valuations are getting stretched. An apparently perplexing trend from the last trading day is that the market declined despite 14018 crores of institutional buying ( FIIs plus DIIs). This indicates that FIIs are increasing their short positions in the derivatives market. So expect more volatility ahead," said Vijayakumar.

In the short-term, the market texture is bullish, but buying on dips and selling on rallies would be the ideal strategy for traders, said Shrikant Chouhan, Head of Equity Research at Kotak Securities, adding that "on the downside, 24,665/81300 and 24,400/80500 or 20 day SMA (Simple Moving Average) would act as key support levels, while 25,100/82700 could serve as an immediate resistance zone for the bulls. A successful breakout above these levels could push the market toward 25,500/83800. However, if the index falls below 24,400/80500, the uptrend could become vulnerable."

An important trend in the market is the sharp rally in defence stocks, said Vijayakumar, adding that "even though this segment has bright medium to long-term prospects, their valuations have become excessive and, therefore, investors have to be extremely cautious. Some profit booking in this segment would be appropriate."

Global Markets


Asian shares edged lower on Monday as mixed economic data from China highlighted ongoing domestic weakness, even as new U.S. tariffs began to weigh on exports. Sentiment was further pressured by continued trade rhetoric from the White House.

In equities, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2%, while Japan’s Nikkei dropped 0.6%. Chinese blue-chip stocks declined 0.4% after April retail sales missed expectations, though industrial output showed a smaller-than-feared slowdown.

Wall Street futures also slipped, while the U.S. dollar weakened and Treasury yields climbed, following Moody’s downgrade of the U.S. government’s credit rating. The ongoing tariff conflict has dampened consumer sentiment, and investors will be watching earnings reports from Home Depot and Target this week for clues on consumer spending trends.

In Europe, futures painted a mixed picture: EUROSTOXX 50 futures inched up 0.1%, FTSE futures slipped 0.1%, and DAX futures were flat.

U.S. 10-year Treasury yields climbed 5 basis points to 4.49%, extending Friday’s rise after the Moody’s downgrade. Market pricing now reflects expectations of just 53 basis points in Federal Reserve rate cuts this year—down sharply from over 100 basis points a month ago. Futures suggest only a 33% chance of a rate move by July, rising to 72% by September, according to Reuters.

In commodities, gold rebounded 0.6% to $3,222 an ounce after falling nearly 4% last week.

FII/DII Tracker


Foreign institutional investors (FIIs) were net buyers for the third consecutive day, purchasing equities worth Rs 8,831 crore on May 16. Meanwhile, domestic institutional investors (DIIs) were also net purchasers, buying equities worth Rs 5,187 crore.

Crude Impact


Oil prices were largely steady on Monday as investors awaited developments in Iran-U.S. nuclear talks and key economic data from China to gauge the potential impact on commodity demand amid ongoing trade tensions with the United States.

Brent crude futures dipped 5 cents to $65.36 a barrel, while U.S. West Texas Intermediate (WTI) crude edged up 3 cents to $62.52 a barrel.

Rupee vs Dollar


The Indian rupee opened 0.1% higher at 85.44 against the U.S. dollar on Monday, compared to the previous close of 85.5050. Traders remained focused on capital flows, developments in U.S.-India trade talks, and the Chinese yuan's movement after last week's volatility.

Meanwhile, the U.S. dollar, which strengthened against major currencies last week, was largely steady on Monday. The dollar index was little changed at 100.85.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)