Sensex Falls Back from Day's High, Nifty Stays Below 23,750: Six Key Factors Fuel Market Correction

Indian Equity Markets Pared Gains Amid Profit Booking and Surging Crude Oil Prices

The benchmark equity indices in India pared early gains on Friday, with investors turning cautious at higher levels and crude oil prices surging. The Sensex, India's premier stock market index, had jumped 471.64 points or 0.62 percent to hit an intraday high of 75,870.36 in early trade. The broader Nifty climbed 149.70 points or 0.63 percent to touch 23,839.30.

However, by around 12:20 pm, both benchmark indices gave up part of their gains as investors turned cautious at higher levels. The Sensex quoted at 75,531.87, still up 133.15 points or 0.18 percent, while the broader Nifty traded higher at 23,733.50, up 43.90 points or 0.19 percent.

Market Performance Comparison

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The decline in the market was led by the Nifty metal, realty, PSU banks, and Oil & Gas indices, which declined up to 1.5 percent. The broader market also traded lower, with the Nifty Smallcap100 and Nifty Midcap100 indices declining 0.23 percent and 0.25 percent, respectively.

The investors booked profits after a 2-day rally in equities, with the Sensex surging 789.74 points to settle at 75,398.72 on Thursday, while the NSE Nifty advanced 277 points to close at 23,689.60.

Shares of oil marketing companies remained under pressure despite a Rs 3 per litre increase in petrol and diesel prices across the country. Investors remained cautious as the hike was seen as lower than market expectations amid elevated global crude oil prices. BPCL, HPCL, and Indian Oil declined between 1.8 percent and 3 percent.

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Concerns over inflation outlook and uncertainty surrounding the pace of global economic recovery could lead to consolidation with the Nifty approaching the 23,900-24,000 resistance zone, according to Hitesh Tailor, Research Analyst at Choice Equity Broking.

The rise in crude oil prices is a concern for the Indian economy, as the country imports a large portion of its crude requirements. Brent crude, the global oil benchmark, rose nearly 2 percent to USD 107.70 per barrel, which could increase inflationary pressures and widen the trade deficit, impacting market sentiment.

Weak global cues also contributed to the decline in the market, with Asian markets trading lower on Friday, tracking concerns over the global economic outlook and geopolitical tensions. South Korea's Kospi, Japan's Nikkei 225, and Hong Kong's Hang Seng were trading in the negative territory, while Wall Street futures were also lower, indicating a weak opening for US markets later in the day.

The rupee opened on a weak note and fell 30 paise to 95.94 against the US dollar after touching fresh lows in the previous three sessions. Forex traders said rising crude oil prices, a strong dollar, and concerns related to the West Asia crisis weighed on investor sentiment.

Geopolitical tensions continued to remain an overhang on the markets, with a ship reportedly seized by Iranian personnel off the United Arab Emirates on Thursday, a day after an Indian cargo vessel carrying livestock from Africa to the UAE sank in waters off Oman.

The meeting between US President Donald Trump and Chinese President Xi Jinping failed to deliver any major breakthrough, especially on the US-Iran front, which kept investors cautious. Anand James, Chief Market Strategist at Geojit Investments Limited, said the sharp rally seen in the previous session reflected favourable momentum in the market.

However, being in the vicinity of the week's peak, an attempt to consolidate could be seen, with the Nifty eyeing 23,910, the 10-day SMA, with a downside marker near 23,600. Slippage past the same may not trigger a collapse, but may lead to an extended period of consolidation.