Mumbai, Oct 7 — Domestic equity benchmarks traded lower in early deals on Wednesday as investors remained cautious ahead of the Reserve Bank of India's monetary policy decision with global cues also mixed.
Sensex declined by as much as 462.44 points or 0.63 per cent to 72,605.37, while Nifty fell 175.65 points or 0.77 per cent to 22,600.
Earlier in the day, the headline indices, the BSE Sensex and the Nifty 50, opened at 72,965.38 and 22,690.45, respectively.
Among sectoral indices, Nifty Consumer Durables was the biggest loser, falling 1.55 per cent, followed by Nifty Metal, which declined 1.34 per cent and Nifty Auto, down more than 1 per cent. Nifty PSU Bank fell 0.94 per cent, Nifty Oil & Gas declined 0.82 per cent, while Nifty Realty and Nifty FMCG dropped up to 0.7 per cent.
Healthcare and pharmaceutical stocks were among the few gainers. Nifty Pharma rose 0.16 per cent and Nifty500 Healthcare edged up. However, Nifty Media advanced 0.74 per cent.
Market participants are also watching crude oil prices, foreign portfolio flows, the rupee and the central bank's assessment of the growth-inflation outlook.
"The 558 point rally in the Nifty from last Thursday's low level has come as a relief for investors. But this rally will face headwinds, constraining a sustained up move. Brent crude is back above $101 and there are no signs of any reversal in FPI outflows. Domestic liquidity and expectations of good Q2 numbers are supporting the market," said analysts.
"The focus of the market attention today will be on the monetary stance and the message from the RBI Governor. A 25 bp hike in policy rates is inevitable and already discounted by the market. What is not discounted is the monetary stance and the central bank's view on the emerging growth-inflation dynamics," according to them.
The market's response to the policy would be influenced by the RBI Governor's comments on the emerging economic scenario, the experts said and noted that the interest-rate differential between India and the US was at very low levels.
"A rate hike to preempt further capital flight has become unavoidable in the context of rising US yields and rising dollar. Therefore, stabilisation of the rupee will also be on top of the RBI Governor's mind even though the focus will be on growth-inflation dynamics," experts said.
Technical analysts remained constructive despite expectations of near-term volatility.
While yesterday's relief rally stalled on approach to 22,800 on anticipated lines, we are hopeful of extension in uptrend with eyes on 22,930 or 23,100-23,220. That said, dips are to be expected today.
While inability to float above 22,690 could bring in volatility, we would remain hopeful of resumption of upswings as long as dips are restricted to 22,574. And, as maintained yesterday, we do not expect a collapse or a stretch beyond 22,050 for now," the expert said.
Moreover, Asian equities traded mixed on Wednesday as investors weighed Wall Street's latest performance, elevated US Treasury yields and ongoing geopolitical tensions. US equities closed higher on Tuesday as oil prices stabilised and Treasury yields retreated, easing some recent market pressures as investors turned their attention towards the upcoming third-quarter earnings season.
In addition, crude oil prices advanced on Wednesday as traders balanced potential supply disruptions from a storm approaching key US production areas and Houthi attacks on Saudi Arabia against rising crude exports from the Middle East.