Midcaps, Smallcaps Hit Hard as Brent Crude Hits Six-Month High
Mumbai, October 24
India's stock market had a tough week as global uncertainty and surging crude oil prices kept investors cautious. Even with a holiday-shortened trading schedule, the week offered no comfort to market participants. The Sensex and Nifty both fell for the fourth straight session. Across the week, the Nifty 50 dropped about 2.4 percent and the Sensex lost nearly 2.2 percent.
On Friday, the last trading session of the week, benchmark indices closed in the red for the fourth successive day. The Sensex ended 125.56 points, or 0.17 percent, lower at 73,123.83. The Nifty closed down 87.65 points, or 0.39 percent, at 22,600.00.
Market analysts pointed to crude oil as the principal concern for domestic equities. Investors trimmed their stakes in riskier investments, and the selloff spread beyond large companies. Mid-cap and small-cap stocks recorded even sharper losses.
The Nifty 50 remains weighed down after four straight sessions of losses. The recent selling has weakened the index's short-term technical structure, making it difficult to retain its earlier gains.
For the Nifty, 22,800 is seen as the first hurdle on the upside, and a close above 23,000 would be important. On the other side, the Sensex's nearest support zone is considered to be between 72,600 and 72,500.
The broader market bore the greater share of the damage. Lofty valuations and a pullback in leveraged positions caused sharp corrections in mid-cap and small-cap stocks, while large-cap shares were relatively steadier.
IT was the only sector that managed to show relative firmness. Although the sector came under pressure early in the week, IT stocks closed the week near unchanged, aided by improved quarterly results and rising investor appetite.
Sectors sensitive to interest rates came under the most pressure. Shares of consumer durables, metals, and realty companies faced heavy selling as concerns about rising costs and margin erosion gained fresh attention.
In the global commodities market, Brent crude hit a six-month high on Friday. It settled 3.1 percent higher at 116.72 dollars per barrel, the highest level since April 29. The US benchmark West Texas Intermediate rose 3.8 percent to 103.27 dollars per barrel.
Brent crude recorded a weekly gain of 6.2 percent, while WTI increased 2 percent during the same period.
Analysts believe that sustained high crude prices could push up transportation and energy costs, weigh on consumer demand, and add pressure to the margins of oil-intensive industries. Consequently, investors are expected to keep a close eye on crude price trends and related global developments in the coming weeks.