Sectoral Performance Today, August 4: IT Drags Markets, Financials Decline Ahead of RBI Policy  

Mumbai, August 4: Indian equity markets witnessed broad-based selling on Tuesday, with 15 of the 16 major sectoral indices ending in the red as investors booked profits after the previous session’s sharp gains and remained cautious ahead of the Reserve Bank of India’s monetary policy decision. Information technology and financial stocks were among the key drags, while rising crude oil prices and uncertainty around the new closing-auction mechanism added to market volatility. The Nifty 50 fell 0.64% to close at 24,614.90, while the Sensex declined 0.27% to 78,428.95. 

IT Stocks Under Pressure 

The information technology sector came under pressure, with the Nifty IT index declining 0.8% as investors turned cautious following the broader market’s reversal. The sector’s weakness added to the pressure on the benchmark indices, given the significant weight of large IT companies in the Nifty. 

The decline came as investors also adjusted positions following the introduction of the new closing-auction mechanism for stocks with futures and options contracts. Infosys declined 1% while TCS fell 0.5%. HCL Technologies also declined 0.5%. 

Financial Stocks Drag Markets 

Financial stocks were another major source of weakness, with the Nifty Financial Services index falling 0.5%. 

The sector’s performance was also closely watched ahead of the RBI’s monetary policy announcement on Wednesday. The central bank is widely expected to hold its policy rate at 5.25%, with investors looking for signals on inflation, growth and liquidity conditions. 

The RBI’s assessment of the impact of higher crude oil prices and a monsoon deficit, along with recent measures aimed at supporting the rupee and attracting foreign capital, will be key factors for rate-sensitive sectors in the coming sessions.  

Outside of the Nifty Financial Services index, LIC came under sharp pressure after the government announced an offer for sale of up to a 6.5% stake in the insurer. 

LIC shares plunged 8.7% after the government launched the stake sale at a 10.9% discount to Monday’s closing price. 

Oil & Gas Stocks Weighed Down By Crude Volatility 

Oil and gas stocks remained under pressure with their index declining 1.15% as crude oil prices rebounded sharply after a steep decline in the previous session. Brent crude rose 2.9% to $86.20 a barrel after falling 7% on Monday, with uncertainty over efforts to end the US-Iran war driving volatility in global energy markets. 

Reliance Industries fell 2.1%, adding to the weakness in the sector. Reliance Industries also declined after the government raised windfall taxes on fuel exports.  

Higher crude prices are a concern for India, the world’s third-largest crude importer, as sustained increases in energy costs could fuel inflation, weigh on economic growth and pressure corporate profit margins. 

FMCG Stocks Fall; Dabur Slides 3.8% 

The FMCG sector also came under pressure, with the Nifty FMCG index declining 0.9%. 

Dabur India was among the notable losers in the sector, with its shares falling 3.8% after India’s food safety regulator barred the company from selling food products carrying unverified or misleading claims such as “100% natural”, “100% pure” and “100% organic”. 

The regulatory action weighed on investor sentiment towards the consumer goods major and added to the broader weakness in FMCG stocks during Tuesday’s session. 

Realty Sector In Focus 

Real estate stocks also faced selling pressure, their index falling 2.4% with DLF among the notable decliners. The stock fell 3.8% after revenue halved. 

The weakness in realty stocks added to the broader risk-off mood in the market, with investors also assessing the implications of interest rates and borrowing costs ahead of the RBI policy decision. 

New Closing Mechanism Adds To Volatility 

The introduction of the new closing-auction mechanism remained a key market theme. The Nifty was more affected than the Sensex, partly because of differences in their exposure to stocks covered by the new system. 

The volatility index climbed to 12.1875, its highest level in a week, as investors adjusted positions ahead of the weekly Nifty derivatives expiry. Analysts said the early volatility could represent an adjustment phase as traders become familiar with the new system, with its impact expected to ease over the coming weeks. 

With the RBI policy decision due Wednesday, crude oil prices volatile and investors still adapting to the new closing mechanism, sector rotation and stock-specific developments are likely to remain key drivers of the Indian market in the near term. 

Source

• NSE