Sensex, Nifty snap 3-day rally as banking and realty stocks drag markets lower

Mumbai: Benchmark equity indices ended a three-day winning run on Friday as selling pressure in banking, financial, realty, and metal stocks overshadowed recent gains.

Investors remained cautious amid renewed concerns about price pressures impacting various sectors.

The Sensex dropped 318.56 points, or 0.39 per cent, to close at 81,592.45. Meanwhile, the Nifty lost 155.05 points, or 0.61 per cent, to settle at 25,144.30. Among the Nifty constituents, Shriram Finance, Tata Motors Passenger Vehicles (TMPV), and Grasim Industries emerged as the top laggards for the session.

Broader market indices also faced declines, with the Nifty MidCap 100 and Nifty SmallCap 100 falling 0.24 per cent and 0.26 per cent, respectively.

Sectorally, Nifty Realty, Nifty Auto, and Nifty Cement posted the largest declines, while Nifty Media was the most resilient, recording the least loss among major indices.

Experts said that the rate hike fear set to test market rally, as rising inflation concerns and the possibility of further monetary tightening weighed on investor sentiment.

"Domestic inflation breaching the RB's upper tolerance limit has reinforced expectations of a prolonged restrictive interest-rate environment," analysts stated.

"Going forward, the trajectory of crude prices, currency stability and foreign investor flows will be critical in determining whether this correction remains a near-term consolidation or develops into a deeper earnings-led adjustment,” it added.

Meanwhile, experts said that for the rupee, that inflation print is double-edged: it signals cost pressure, but a December hike would also widen India’s already sizeable rate advantage over the US and support the currency’s carry appeal. "Strong foreign inflows, over INR 7,800 crore on Thursday, remain a genuine cushion. The near-term swing factor is oil: if Brent climbs back, the rupee’s recovery stalls; if it resumes falling, 94 holds," market experts stated.

"We believe this phase calls for greater selectivity rather than a broad-based defensive approach. Banking, capital goods and consumption-oriented stocks will need to demonstrate earnings resilience to attract fresh buying," experts added.

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