Sensex, Nifty open flat after rally as oil prices, foreign fund outflows weigh

Indian equity benchmarks opened largely flat on Wednesday after posting their strongest single-day gains in months in the previous session, as elevated crude oil prices and continued foreign fund outflows kept investors cautious. Market participants also assessed corporate earnings and awaited key US inflation data for further cues.

The 30-share BSE Sensex opened at 73,049.76, up 15.98 points, or 0.02%. The NSE Nifty 50 stood at 22,715.75 at the opening, down 6.20 points, or 0.03%.

GIFT Nifty futures were trading at 22,764 at 7.50 am, indicating a muted start for the domestic benchmark. The Nifty had closed at 22,721.95 on Tuesday.

Tuesday's rally lifts market sentiment

The Sensex and Nifty rose around 1.6% each on Tuesday, supported by gains in information technology stocks after HCLTech reported quarterly earnings that exceeded market expectations.

The Sensex surged 1,109 points to close near the day's high, marking its strongest single-day gain in four months. The rally was supported by buying in IT, financial and fast-moving consumer goods (FMCG) shares, a recovery in the rupee and Finance Minister Nirmala Sitharaman's remarks on the long-term capital gains (LTCG) tax.

The Sensex settled at 73,033.78, gaining 1,120.99 points, or 1.55%, at its intraday high of 73,045.67. The Nifty climbed 358.60 points, or 1.60%, to close at 22,721.95, recording its strongest single-day rebound in more than two months.

Despite the recovery, analysts remained cautious about the sustainability of the rally, given the pressure from crude oil prices and persistent foreign investor selling.

Crude oil near $107 keeps investors cautious

Oil prices climbed to around $107 a barrel as traders assessed supply risks arising from fighting between Yemen's Iran-aligned Houthi rebels and Saudi Arabia. Markets were also weighing the prospect of increased diesel supplies from Russia.

Higher crude prices remain a concern for India, a major oil importer, as they can increase inflationary pressures and widen the country's external balance risks.

“While earnings and strength in IT provided some support, the rising crude oil prices on escalating Mideast tensions remain a significant concern, as they keep inflationary and external balance risks elevated,” Reuters quoted Ponmudi R, chief executive officer of Enrich Money, as saying.

“Overall, the near-term outlook has improved following the recent recovery, but the broader trend remains cautious,” Ponmudi added.

Foreign investors continue selling Indian equities

Foreign portfolio investors (FPIs) remained net sellers of domestic equities for the 13th consecutive session on Tuesday, withdrawing ₹13.05 billion, equivalent to $136.96 million.

Domestic institutional investors (DIIs), however, continued to provide support to the market. They purchased shares worth a net ₹24.39 billion, according to provisional data from the National Stock Exchange (NSE).

The sustained foreign outflows remain a source of concern for investors, even as domestic institutional buying and improving sentiment following Tuesday's rally have helped limit downward pressure.

Asian markets, US inflation data in focus

Other Asian equity markets edged higher on Wednesday, with artificial intelligence-linked stocks recovering some ground after losses in the previous session.

However, gains remained limited as investors awaited US inflation data due later in the day. The figures are expected to provide fresh clues about the outlook for monetary policy and global financial markets.

For Indian equities, the direction of crude oil prices, movements in the rupee, foreign fund flows and developments in global markets are likely to remain key factors influencing trading.

Tata Elxsi, Anand Rathi and Transformers and Rectifiers in focus

Among individual stocks, Tata Elxsi could attract investor attention after the engineering research and development company reported higher quarterly profit, supported by growth in its transportation and media segments.

Anand Rathi Share and Stock Brokers also reported a sharp sequential increase in net profit.

Transformers and Rectifiers India posted more than a twofold rise in profit for the September quarter compared with the corresponding period a year earlier.

Investors are expected to track these earnings announcements alongside broader macroeconomic developments as the market attempts to sustain the previous session's recovery amid continuing concerns over oil prices and foreign investor withdrawals.