Stock Market Highlights Today: BSE Sensex ends flat, Nifty50 reclaims 23,400; crude oil prices drop

Markets are likely to remain volatile in the near term amid escalating tensions in West Asia, which continue to keep crude oil prices elevated and triggering persistent Foreign Institutional Investor outflows. Investor sentiment is expected to remain cautious as the lack of meaningful progress in the ongoing US-Iran negotiations continues to fuel concerns over global energy supplies, inflationary pressures and broader macroeconomic stability. After witnessing a brief recovery in the previous session, the Nifty resumed its downward trend and fell as much as 1.2% on Wednesday amid persistent geopolitical tensions in West Asia, concerns over elevated crude oil prices and persistent FIIs outflows. However, value buying at lower levels helped the index recover most of its losses and close 0.3% lower at 23,405. Broader markets remained weak, with the Midcap100 and Smallcap100 indices declining 0.4% and 0.1% respectively. The prevailing uncertainty has kept Foreign Institutional Investor outflows persistent, with FIIs selling equities worth ₹12,274.6 crore over the past two trading sessions, reflecting heightened risk aversion and a cautious stance toward emerging markets.

Adding to the pressure, the Indian rupee remained weak at 95.6 against the US dollar amid concerns over inflation and the broader macroeconomic outlook. On the sectoral front, IT stocks came under sharp selling pressure, with the Nifty IT index declining 5.5%, snapping a three-session rally of nearly 8%. Heavyweights such as Infosys, TCS, Tech Mahindra and HCL Tech fell up to 9% amid profit booking. Reflecting the broader risk-off sentiment, India VIX surged 6.2%, indicating heightened investor uncertainty and expectations of increased market volatility in the near term. RBI’s Monetary Policy Committee meeting commenced on Wednesday, with the policy outcome scheduled to be announced on Friday. While markets largely expect the RBI to maintain the repo rate at current levels, elevated crude oil prices, rupee weakness and inflationary risks have also led to discussions around the possibility of a more cautious stance or a delay in any future rate-cut expectations.

Providing some support to the domestic growth outlook, India’s Services Purchasing Managers’ Index (PMI) climbed to a six-month high of 61.2 in May from 58.7 in April, driven by strong domestic demand and healthy business activity. Meanwhile, global trade-related concerns have resurfaced after the US proposed an additional tariff of up to 12.5% on imports from 54 countries, including India, citing inadequate measures to prevent the import of goods produced using forced labour. While the proposal remains under review, adding another layer of uncertainty for export-oriented sectors and keeps the spotlight on ongoing India-US trade negotiations. Going ahead, the recent declining market highlights the increasing sensitivity of domestic equities to geopolitical developments, with investors closely tracking energy prices, ongoing US-Iran negotiations, Foreign Institutional Investor flows, movements in the rupee for further direction and the decisions of RBI’s Monetary Policy Committee meeting, says Siddhartha Khemka – Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd.