Sensex, Nifty Fall as Austerity Fears and Crude Oil Prices Weigh on Markets

Sensex, Nifty open lower amid austerity concerns, rising crude prices

New Delhi, May 12

The BSE Sensex opened at 75,637.76 points, down 377.52 points or 0.50 per cent, while the NSE Nifty 50 slipped 93.25 points or 0.39 per cent to start the session at 23,722.60 points.

Among sectoral indices, Nifty IT emerged as the top loser in early trade, falling 1.67 per cent to 28,838.85 points. Nifty Financial Services 25/50 and Nifty Private Bank indices also traded lower by 0.46 per cent each. Nifty PSU Bank and Nifty Consumer Durables indices declined 0.38 per cent and 0.18 per cent, respectively, while Nifty FMCG and Nifty Healthcare registered marginal losses.

On the gaining side, Nifty Oil & Gas advanced 0.61 per cent, as government cuts royalty charges on domestic production of oil and gas. Nifty Metal rose 0.58 per cent to 13,001.35 points. Nifty Realty also traded in positive territory, up 0.23 per cent.

VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said the prime minister's austerity appeal had impacted sectors expected to witness reduced consumption.

"The austerity call by the prime minister impacted the stock prices of sectors which are expected to be negatively affected by reduced consumption. Stocks of sectors like jewellery, travel and hotels bore the brunt of selling yesterday. It is important to understand that these sectors will bounce back smartly if crude falls sharply and the austerity package becomes irrelevant. Therefore, watch out for the West Asia geopolitical situation and crude prices," he said.

He added that sectors insulated from the austerity measures are likely to remain resilient.

"Meanwhile, sectors which are not impacted by the austerity appeal will remain resilient. Pharmaceuticals is the segment which is not impacted at all since the sector has inelastic demand. Additionally, it gains from rupee depreciation. FMCG also will be least impacted," Vijayakumar noted.

Highlighting opportunities in capital goods, he said there were clear signs of recovery in capital formation.

"One sector to watch out for is capital goods. There are clear signs of recovery in capital formation as indicated in the 67 per cent spurt in private capex in September last year. This positive news has been drowned in the flood of negative news. If this private capex cycle is to sustain, the capital goods stocks will do well. Demand in sectors like automobiles and renewable energy continues to be buoyant supporting capex in these sectors," he added.

According to Bajaj Broking, Nifty was likely to open below the lower band of the last three weeks' range of 23,800-24,400.

"Holding above 23,800 on a closing basis will signal extension of the last three weeks' consolidation. On the higher side, immediate resistance is placed at Monday's gap-down area of 24,127-23,997. Index sustaining below the same will keep the bias down," the brokerage said in a report on Tuesday.

The report added that Bank Nifty was trading near the lower end of its three-week range of 54,000-56,500.

"While holding above 54,000 on a closing basis will signal extension of the recent consolidation, immediate resistance is placed at Monday's gap-down area of 55,000-55,065. Index sustaining below the same will keep the bias down," it said.

In the commodities market, Brent crude prices rose 0.69 per cent to USD 104.93 per barrel, while crude oil traded at USD 98.88, up 0.82 per cent. Gold prices, meanwhile, slipped 0.20 per cent to USD 4,726.27.

— ANI