The Indian stock market began the trading session with positive momentum after a three-day decline, but soon experienced a sharp drop. The market initially showed growth due to activity in IT stocks. The BSE Sensex opened at 73,665.64 points, showing an increase of 416.25 points, and the NSE Nifty 50 reached 22,742.20 points, increasing by 54.55 points. Bank Nifty also started with a rise of 40.05 points, reaching 54,965.75 points. Specifically, Nifty showed a rise of more than 300 points among IT stocks; TCS shares rose by 2.63%, Infosys by 1.53%, Wipro by 0.85%, and HCL Tech by 1.22%.
However, as trading time increased, the pace of market growth slowed down. Weakness in international stock markets and high crude oil prices negatively affected the market. The rise of Sensex and Nifty gradually weakened, and Nifty, which opened in the green zone, quickly turned red. It lost more than 100 points, and Sensex fell by more than 150 points, also entering the red zone. Bank Nifty remained in the red zone throughout the day, losing more than 500 points.
Brent Crude price holds around $114 per barrel
Brent Crude is trading around $114 per barrel. Since India imports a significant portion of its needs, rising oil prices could put pressure on inflation, companies' production costs, and the country's trade deficit. In the foreign exchange market, the Indian rupee also started moving with slight support. Compared to the closing on Thursday at 94.82 rupees per dollar, the rupee opened at 94.79 per dollar on Friday, strengthening by 3 paisa. Meanwhile, Asian markets saw a decline, and US stock markets also closed mostly negative on Thursday.
Investor concerns related to growing corporate spending on artificial intelligence (AI) and high crude oil prices pressured market sentiment. The domestic market will now watch company results for the third quarter. These reports will show how companies are coping with high energy costs, a weak global environment, and economic uncertainty.
Market support expected next week
There are also positive signals for the stock market. A significant fall in the yield of US 10-year treasury bonds and the strengthening of the rupee could contribute significantly. These factors are capable of helping reduce selling by Foreign Institutional Investors (FIIs), which in turn can support the stock market. Furthermore, the Jio Platforms IPO attracted about 3.73 lakh crore over the last two days. After the share distribution process is complete, it is expected that more than 3 lakh crore of this amount will return to the market, which could increase the availability of funds in the market next week and support stocks.
Expected rally in large-cap stocks
If there is a rise in the stock market on Monday, it may be led by large corporate stocks. There is relative stability in large-cap stocks, and opportunities may arise to invest in stocks of companies with good growth at reasonable prices. Conversely, pressure may persist in the mid-cap and especially small-cap segments. Previously, the growth of these stocks was driven not so much by strong operational performance of the companies as by an additional inflow of cash into the market. Thus, justifying the current prices of some stocks based on their operating results may be difficult.
What signals for investors?
Currently, the market faces two types of signals. On one hand, buying in IT stocks, a slight strengthening of the rupee, and a potential influx of funds next week could support the market. On the other hand, crude oil priced around $114 per barrel, weakness in global markets, and uncertainty regarding quarterly company results increase risks. In such an atmosphere, making decisions based solely on the initial market rise is not the right step. Besides looking for investment opportunities in large and reliable companies, attention must be paid to company profits, its valuation, and risks. Special caution should be exercised when investing in small-cap stocks.