Market Close Today, August 4: Nifty, Sensex End Four-Day Rally As New Closing Mechanism, RBI Policy In Focus 

Mumbai, August 4: Indian equity benchmarks ended lower in a volatile session on Tuesday, snapping a four-day winning streak as the Nifty 50 partially reversed the sharp gains recorded in the previous session following the introduction of a new closing-auction mechanism for stocks with futures and options contracts. The market also remained cautious ahead of the Reserve Bank of India’s policy decision on Wednesday, while rising crude oil prices and positioning ahead of the weekly Nifty derivatives expiry added to the volatility. 

At the close, the Sensex fell 210.08 points, or 0.27%, to 78,428.95, while the Nifty 50 declined 159.40 points, or 0.64%, to end at 24,614.90. The Nifty’s decline came a day after it had surged 1.6%, while the Sensex had gained 0.7%, an unusual divergence that followed the implementation of the new closing-auction mechanism. Market breadth was nearly evenly split, with 2,030 shares advancing, 2,037 declining and 174 remaining unchanged. 

New Closing Mechanism Triggers Volatility 

The new Closing Auction Session (CAS) mechanism remained a key factor behind Tuesday’s choppy trading. The system, which applies to stocks with futures and options contracts, prompted investors to adjust positions after the sharp late-session moves seen on Monday. 

The Nifty was more affected than the Sensex, partly because of differences in their exposure to stocks covered by the new mechanism. The volatility index also climbed to 12.1875, its highest level in a week, as traders adjusted positions ahead of the weekly Nifty derivatives expiry. 

Analysts said the volatility could be part of an initial adjustment phase as market participants adapt to the new system. The impact is expected to ease as traders become more familiar with the mechanism, which was introduced with the objective of reducing price distortions around closing levels. 

IT, Financials Fall 

Selling was broad-based across sectors, with only the Nifty Metal and Nifty Media indices ending in positive territory. 

Information technology stocks came under pressure, with the IT index declining 0.8% and financials falling 0.5%. Oil and gas stocks also weakened, while the Realty, Infrastructure, Private Bank, Consumer Durables and FMCG indices fell between 0.5% and 2%. 

The Nifty Midcap index declined 0.3%, while the Nifty Smallcap index bucked the broader trend to gain 0.2%, indicating selective buying interest in the broader market. 

Hindalco, Trent Among Top Nifty Gainers 

Hindalco Industries emerged among the top gainers on the Nifty 50, and so did Trent, Apollo Hospitals, Jio Financial Services, ITC and Eternal. 

On the losing side, Grasim Industries was the biggest laggard on the benchmark index. HDFC Life, Max Healthcare, Bajaj Auto and Reliance Industries were among the other major Nifty losers. 

Shares of Life Insurance Corporation of India fell sharply after the government announced an offer for sale of up to a 6.5% stake in the insurer at a discounted price. Reliance Industries also declined after the government raised windfall taxes on fuel exports, while DLF fell as revenue halved. 

Crude Oil Rebound Adds To Market Concerns 

Crude oil prices also returned to focus after Brent rebounded sharply from the previous session’s sell-off. Brent crude rose 2.9% to $86.20 a barrel after plunging 7% on Monday, as uncertainty over talks to end the US-Iran war continued to drive volatility in energy markets. 

Higher crude prices remain a concern for India, the world’s third-largest crude importer, as a sustained increase could add to inflationary pressures, weigh on economic growth and squeeze corporate profit margins. 

RBI Policy Decision In Focus 

Investors are now turning their attention to the Reserve Bank of India’s monetary policy decision due on Wednesday. The central bank is widely expected to keep its policy rate unchanged at 5.25% as it assesses the impact of higher crude prices, a monsoon deficit and recent measures aimed at supporting the rupee and attracting foreign inflows. 

The RBI’s policy stance and commentary on inflation and growth will be closely watched by investors, particularly after Tuesday’s broad-based market decline. 

After four consecutive sessions of gains, the Nifty’s close below 24,650 signals a pause in the recent rally. Market participants will now track the RBI decision, crude oil prices, foreign fund flows and the market’s adjustment to the new closing-auction mechanism to assess whether the benchmarks can regain momentum or enter a period of consolidation. 

Source

• NSE
• BSE