Markets Close Lower Despite FII Tax Relief; RBI Outlook Weighs

Markets close lower despite FII tax relief ordinance; RBI outlook weighs

New Delhi, June 5

The BSE SENSEX closed at 74,243.34 points, down 116.67 points or 0.16 per cent. The NSE NIFTY 50 settled at 23,366.70 points, losing 49.85 points or 0.21 per cent.

Market participants initially drew comfort from measures aimed at improving foreign capital inflows, including the ordinance addressing tax-related concerns for foreign investors. However, sentiment remained subdued after the RBI maintained the repo rate and lowered its GDP growth forecast.

Ponmudi R, CEO of Enrich Money, said, "Indian equity markets ended on a mildly negative note, reflecting a lack of conviction among investors amid mixed global signals and persistent domestic concerns. Although the Nifty opened higher, gains proved short-lived as selling pressure emerged through the day, highlighting the market's continued sensitivity to external risks and macroeconomic uncertainties."

According to Ponmudi, the RBI's policy announcement delivered a mixed message for the markets.

"The key positives were the measures aimed at attracting foreign capital, including steps to ease access for global investors and reduce tax-related frictions in bond markets, initiatives designed to support capital inflows and provide stability to the rupee, which has come under considerable pressure amid persistent geopolitical tensions and foreign fund outflows," he said.

The Reserve Bank kept the repo rate unchanged and revised its GDP growth forecast downward to 6.6 per cent from 6.9 per cent.

Ponmudi said the central bank's decision reinforced concerns about economic growth prospects.

"The central bank's decision to leave the repo rate unchanged, coupled with a downward revision of its GDP growth forecast to 6.6 per cent from 6.9 per cent, reinforced concerns over a more challenging economic environment. While the policy underscored the RBI's commitment to preserving macroeconomic stability, it stopped short of providing a strong catalyst for risk assets, leaving investor sentiment broadly cautious and limiting the scope for a meaningful recovery in equities," he added.

Global geopolitical developments also weighed on investor sentiment. Israel-Lebanon's latest ceasefire showed few signs of holding, dampening optimism surrounding the US-Iran peace process and affecting regional risk appetite.

The Strait of Hormuz remained closed, exacerbating concerns over the energy supply outlook. At the time of filing, Brent crude traded at USD 94.64, down USD 0.39 or 0.41 per cent, while crude oil fell USD 0.38 or 0.41 per cent to USD 92.66. Gold traded at USD 4,466.06, down USD 8.83 or 0.20 per cent.

"On the positive side, the rupee strengthened below the Rs 95 mark against the U.S. dollar due to the central bank's foreign capital measures," Ponmudi noted.

Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, said the benchmark index continued to move within a narrow trading range.

"Over the last few trading sessions, Nifty has been oscillating within a narrow range of nearly 410 points, indicating a phase of consolidation after the recent volatility. The ongoing range-bound price action suggests indecisiveness among market participants, with buyers emerging at lower levels while sellers continue to cap gains near higher zones. The index continues to trade below its 20-day and 50-day EMA, highlighting a cautious undertone in the short term," Shah said.

The broader market also remained under pressure. The Nifty Midcap 100 index declined 0.35 per cent, while the Nifty Smallcap 100 index ended marginally lower by 0.06 per cent.

"Market breadth remained mixed, with 240 stocks from the Nifty 500 universe closing in the green, while 258 stocks ended in the red, highlighting the lack of broad-based conviction," Shah added.

— ANI