Can markets extend gains amid rising crude and rate hike fears?

Mumbai: Indian benchmark indices snapped a three-session winning streak on Friday as rising crude oil prices and a sharper-than-expected increase in retail inflation weighed on investor sentiment. Inflationary concerns and the possibility of a rate increase at the next monetary policy review dented D-Street sentiment.

The BSE Sensex fell 318.56 points, or 0.39%, to close at 81,592.45, while the NSE Nifty50 declined 155.05 points, or 0.61%, to 25,144.30. Despite Friday’s decline, the benchmarks ended the week with gains. The Sensex rose 0.7%, while the Nifty gained 0.45%.

Brent crude futures climbed to around $95.5 a barrel from nearly $92, as escalating attacks on Saudi energy infrastructure and disruptions to shipping through the Strait of Hormuz threatened global oil supplies. Investor concerns intensified after India’s retail inflation rose to 6.09% in October, crossing the RBI’s 6% upper tolerance limit for the first time in two years.

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“The market’s risk environment has become more complicated towards the end of the week with October retail inflation rose to 6.09%, moving above the RBI’s upper tolerance band, while food inflation accelerated to 8.94%, raising concerns about the interest-rate outlook and household consumption,” said Gaurav Garg, head -research, Lemonn. He also said sustained increase in crude prices could put pressure on India’s current account, the rupee, corporate input costs and inflation, potentially offsetting some of the benefits of foreign fund inflows. “Looking ahead, our near-term view remains cautiously positive, but we expect markets to undergo consolidation with intermittent volatility rather than continue moving higher in a straight line,” Garg said.

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Sectorally, realty, auto and cement stocks witnessed the sharpest selling pressure. Banking, financial services and metal shares also weighed on the benchmarks.

Broader markets also ended lower, though losses were relatively contained with both Nifty Midcap 150 Index and Nifty Smallcap 250 Index down 0.3% each.