Nifty, Sensex open on cautious note due to Rupee weakness, RBI’s MPC and Putin visit in focus

NEW DELHI: The domestic benchmark indices witnessed selling pressure on Wednesday’s opening trade as the weakening Rupee and cautious investor sentiment weighed on the markets.

With the Reserve Bank of India’s Monetary Policy Committee (MPC) meeting beginning today, and the upcoming Modi-Putin meeting on December 4-5 being seen as a significant global event, traders remained guarded in the early hours.

The Nifty 50 index opened at 26,043.60, up 11.40 points (0.04 per cent), but soon slipped to the 25,942 level, indicating early volatility. The Sensex also opened in the green at 85,180.72, rising 42.45 points (0.05 per cent), but quickly fell to around 84,840 as selling intensified.

Analysts said the sharp fall in the Rupee and continuous outflow of foreign portfolio investments (FPI) have created a negative cycle for the equity markets, adding to concerns over macroeconomic stability.

Ajay Bagga, Banking and Market Expert, told ANI, “Indian markets are facing pressure with the fall in the Rupee leading to more FPI outflows in a vicious circle. The nominal GDP being below the budgeted nominal GDP number is putting the Union Budget maths under stress. And with FPI outflows continuing, the Rupee is under continued pressure. We are expecting a level of Rs 91 to the dollar in the next two months.”

Bagga added that the RBI faces a key policy dilemma at the MPC meeting, explaining, “The RBI faces a dilemma in its MPC starting today, as it wants an orderly move in the Rupee for which it needs to hold interest rates and on the other hand there is a need to stimulate the nominal GDP by cutting the real interest rate which is at a very restrictive 5 per cent level.”

Broader market indices also remained weak, with the Nifty 100 down 0.42 per cent, Nifty Smallcap declining 0.53 per cent and Nifty Midcap 100 falling 0.45 per cent.

Sectoral indices on the NSE saw widespread pressure, except for Nifty IT. Nifty FMCG dropped 0.93 per cent, Nifty Auto slipped 0.68 per cent, Nifty PSU Bank fell more than 1 per cent, and Nifty Consumer Durables was down 0.74 per cent.

Despite strong structural fundamentals, short-term sentiment has turned cautious.

Ponmudi R, CEO of Enrich Money, said, “India’s structural growth story remains firmly on track, supported by strong earnings visibility and a supportive policy environment. A potential rate cut continues to stand out as a key near-term trigger and could unlock a 2-3 per cent upside over the week.”

However, he pointed out that fading momentum, sustained FII selling pressure and the Rupee’s drop to fresh lifetime lows have softened the immediate outlook.

“Nifty has now tested the rising slope support from the 30th October low for the fourth consecutive time, reinforcing the strength of the 25,950-26,050 demand zone, which also aligns closely with the rising 20-day EMA near 25,950,” he said.

Global cues also contributed to the cautious start. While US markets recovered on Tuesday, Asian markets traded mixed, and geopolitical factors remained in focus as US negotiators held talks in Russia regarding the Ukraine crisis.

Data released on Tuesday showed emerging markets recorded a massive outflow of USD 22 billion in November, driven by a mid-month risk-off shift and heavy profit booking from outperforming Korean and Taiwanese markets. (ANI)