Indices hit new highs but again fail to hold gains on FII sales

Mumbai: India’s equity indices ended marginally lower on Monday after hitting fresh lifetime highs earlier in the day as the market continued to face hurdles at record levels amid a weakening rupee and lack of clarity on the much-awaited US-India trade deal.

NSE’s Nifty rose as much as 0.5% to an all-time high of 26,325 in opening trades, before it gave up all gains to close at 26,175, down 27.2 points or 0.1%. The BSE Sensex also made a record of 86,159, before ending 64 points lower at 85,641.

Both Nifty and Sensex made all-time highs before ending lower on Monday as well as on Thursday.

This was the third consecutive session for Nifty where it made an all-time high before ending lower. The Sensex saw this happen on Monday as well as Thursday.

“The market has struggled to sustain its gains because of two key headwinds: uncertainty from delays in the trade deal, and expectations of a 25-basis point RBI rate cut in December, which may exert additional pressure on the currency,” said Shrikant Chouhan, head of Equity Research, Kotak Securities.

The rupee hit an all-time low of 89.79 against the dollar ahead of RBI’s monetary policy meet on Friday. A weaker currency could prompt further foreign outflows, limiting Nifty’s ability to hold higher levels, said Chouhan.

On Monday, foreign portfolio investors net sold shares worth ₹1,171 crore. Domestic institutions were buyers worth ₹2,559 crore. Foreign investors were sellers of ₹11,593 crore in the secondary markets in the month of November, from being buyers of shares worth ₹919 crore in October.

Ankit Soni, assistant vice president of fundamental research at Mirae Asset Sharekhan, said the market isn’t able to hold on to its gains due to persistent FII selling, depreciating rupee as a result of higher imports, and the delay in the US-India trade deal.

“Currently, any buying by DIIs or retail investors is being neutralised by foreign outflows, leaving the market without the follow-up buying it needs. New all-time highs can’t be maintained on domestic flows alone,” he said.

In the broader market, the Nifty Midcap 150 dropped 0.1% and Nifty Small-cap 250 rose 0.2% on Monday.

Elsewhere in Asia, China advanced 0.65%, Hong Kong rose 0.7%, whereas Japan fell 1.9%, South Korea declined 0.2% and Taiwan dropped 1%. The pan-Europe index Stoxx 600 closed flat.

The market is also seeing heavy call writing in the 26,200-26,400 zone, which is preventing the Nifty from closing meaningfully above these levels, said Rajesh Palviya, head of Technical and Derivatives Research at Axis Securities.

High intraday volatility in the benchmark indices may continue over the coming days, said analysts.

“The support base for Nifty has now shifted higher to the 25,800-25,900 zone, and although the Nifty continues to make periodic new highs, this trend is likely to persist unless we see signs of recovery in the broader market or renewed strength in the rupee,” said Ruchit Jain, vice president at Motilal Oswal Financial Services. “Until then, market action will remain stock-specific, with a focus on large-cap names.”