Sensex surges on IT gains as weak rupee caps broader market
India's benchmark indices rallied on strong IT sector performance ahead of major corporate earnings, though foreign outflows and a weakening rupee signal underlying market vulnerability.
Indian blue-chip stocks rallied sharply in early trading, with the Sensex gaining over 700 points to cross 77,900 and the Nifty 50 reclaiming the 24,250 level. The surge was led by the information technology sector, where heavyweights like Infosys, TCS, Tech Mahindra and HCL Tech jumped between 2% and 3%. Reliance Industries also climbed more than 1% ahead of its first-quarter earnings announcement scheduled for after market hours.
Despite the headline index strength, underlying market sentiment remained fragile. Broader markets traded in the red, with the Nifty Midcap 100 and Smallcap 100 indices posting marginal losses. Market breadth was distinctly negative on the National Stock Exchange, with 1,607 stocks declining against just 856 advances.
The divergence between large-cap gains and broader weakness reflects caution driven by currency pressures and foreign fund outflows. The Indian rupee has depreciated by more than 1% this week, making it the worst-performing currency in Asia. VK Vijayakumar, Chief Investment Strategist at Geojit Investment, attributed this weakness to low FCNR B deposit mobilisation by commercial banks, a trend driven by high US bond yields.
These currency headwinds have started to reverse foreign investor sentiment. Foreign institutional investors were net sellers of Indian equities on Thursday, offloading shares worth nearly Rs 4,206 crore according to provisional exchange data. While FIIs had been net buyers in nine of the previous twelve sessions in July, the renewed selling threatens to cap further market upside.
Geopolitical risks are also adding to the cautious atmosphere. Brent crude futures edged higher to trade near $85 a barrel, while WTI crude approached $80, as tensions between Iran and the United States escalated. While well below the peaks seen earlier in the year, the uptick in oil prices adds to India's import bill concerns.
Market direction in the near term will likely depend on impending earnings releases. Reliance's results today and private banking sector reports expected on Saturday are critical catalysts for next week's trading. Anand James, Chief Market Strategist at Geojit Investments, noted that successive days of shrinking trading ranges have created a triangular formation on the charts. “Towards this end, we will continue to eye the 23,940-24,270 range, aiming for upswings as the starting bias,” he said, warning that volatility will likely precede any clear directional breakout.
