Sensex, Nifty decline up to 1%; what is hurting sentiment?

Stock market today: Indian equities started Wednesday’s session in the red as the US inflation print released on Tuesday came in higher than estimates, tempering expectations of the US rate cut in May this year.

At around 9:19 am, Nifty traded 0.71 per cent or 154.2 points, lower at 21,589.9, while at the day’s low, it hit levels of 21,553.7. Similarly, the Sensex traded lower by 0.8 per cent, or 561.06 points, to 70,994.

Here are the likely factors that triggered the downside:

US inflation print

As inflation data in the US came in hotter than expected at 3.1 per cent for January, sentiment took a hit as fresh concerns around rate cuts by the US Fed surfaced. The reading supported Fed officials' warnings that sticky inflation will keep rates higher for longer.

Global markets

Tracking a weak overnight market in the US that saw Wall Street indices tumble from record highs, most Asian markets slipped in trade on Wednesday. South Korea’s Kospi traded with a cut of 1.15 per cent, while Japan’s Nikkei slipped from a 34-year high and was down by 0.8 per cent.

Heavyweights drag

Stocks from the IT space, including Infosys, Tech Mahindra, Wipro, and LTI Mindtree, all traded in the red with losses of over 2 per cent. Besides, HDFC Bank declined as much as 2 per cent.

Higher bond yields

The 10-year US Treasury yield has gained only to decline marginally later to 4.315 per cent. A higher bond yield in the US will trigger foreign investors to pull out their money from emerging markets, including India, leading to a temporary decline or uncertainty in Indian equities. 

Technical factors

While challenges posed by the 21,690–720 region were dealt successfully after a couple of attempts, "there was not enough momentum to see past 21,835, which we had pencilled in yesterday as a critical region before upside momentum is signalled," noted Anand James, Chief Market Strategist, Geojit Financial Services.

"This leaves the 21,500–250 trajectory intact, but we are not sure if such downswings could evolve into a 20,800–20,500 plunge right away," the expert added.