Inflation, Oil & Macro Risks Shake Market Sentiment

Indian markets remained weak as investors closely monitored inflation trends, fuel price hikes, and geopolitical developments.

Continuing from where we left off in the previous issue, Indian equity markets remained under pressure during the last fortnight. Indian benchmark indices BSE Sensex and Nifty 50 witnessed a sharp decline at the beginning of the period after the Prime Minister urged citizens to adopt austerity measures, triggering concerns over consumption demand and the broader economic outlook. Although markets attempted a recovery in the later trading sessions, the gains were insufficient to offset the initial sell-off. As a result, both frontline indices ended the fortnight with losses of nearly 2 per cent each.[EasyDNNnews:PaidContentStart]

The cautious mood was even more visible in the broader markets. The BSE 150 Midcap Index declined 1.58 per cent, while the BSE 250 Smallcap Index slipped sharply by 3.84 per cent, reflecting weakening risk appetite among investors. Sectoral performance also remained largely negative, with only metal and healthcare indices managing to stay in positive territory. On the other hand, sectors such as Real Estate, auto, and consumer durables emerged among the worst performers amid fears of subdued discretionary spending, rising inflationary pressures, and the government’s cautious messaging on consumption.

The overall performance of the equity market remained somewhat pessimistic amid multiple prevailing macroeconomic concerns. The government raised petrol, diesel, and CNG prices once again, marking the fourth hike in less than two weeks amid mounting pressure on domestic fuel supply dynamics. India’s wholesale inflation unexpectedly climbed to 8.3 per cent in April, marking its fastest rise in nearly three-and-a-half years. The Indian rupee remained under pressure at the start of the fortnight, continuing its depreciation trend and moving close to the 97-per-dollar mark amid persistent global uncertainties.

However, the domestic currency witnessed a partial recovery in the later sessions after the Reserve Bank of India signalled its readiness to step up intervention measures to curb excessive volatility in the foreign exchange market. Earlier, the central bank had significantly increased its dollar sales to stabilise the rupee and manage sharp currency fluctuations. The RBI sold a net USD 53.13 billion in the spot foreign exchange market during FY26, highlighting its aggressive stance toward maintaining currency stability. In another major development, the RBI approved a record-high Dividend transfer of ₹2.87 lakh crore to the Government of India, providing a significant fiscal boost.

On the institutional front, foreign institutional investors (FIIs) remained net sellers, offloading equities worth around ₹21,200 crore. In contrast, domestic institutional investors (DIIs) continued to support the markets, with strong inflows of nearly ₹35,500 crore, helping stabilise sentiment. At the time of writing this column, there is still no positive development regarding the Middle East crisis. The situation around the Strait of Hormuz remains a key factor that could guide market direction ahead. Stay tuned for further updates!

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