Nifty Posts Longest Weekly Losing Run Since Covid Crash

Synopsis

The Nifty 50 fell for a seventh week to close at 23,140.50, its biggest week-on-week plunge since the Covid-19 crash in 2020. The sell-off was largely as expected, fuelled by higher crude oil prices, surging US Treasury yields and continued foreign fund outflows, coupled with some partial relief on Friday.

Seven Weeks of Decline

The Nifty 50 index fell by its biggest weekly loss in a year and a half on Friday, ending at 23,140.5, its seventh consecutive week of losses since the Covid-19 crash of February-April 2020, during which the index also suffered the same number of weekly losses.

The index ended 205.90 points lower than a week ago when it was at 23,346.40, but rose to 23,414.30 on Monday before giving up those gains.

The BSE Sensex closed at 73,895.74 on Friday, up 315.20 points or 0.43 per cent from Thursday's close, while the Nifty rose 77.40 points or 0.34 per cent to 23,140.50.

The Nifty was in a losing streak for the seventh week in a row, despite the bounce on Friday, when it lost a total of 1430 points or 5.8 per cent in the seven-week period.

What Caused the Rally?

The pressure points in the week were different but interrelated. The index has fallen 12.3 per cent from its 52-week high of 26,373.20, while the Tata group ownership drama, IRDAI circular and Brent crude reaching $106 were among the highlights of the week.

The causes have remained the same in the streak: higher oil prices tied to Strait of Hormuz disruption, rising global bond yields that add to an emerging-market equity hurdle rate and tepidness ahead of additional US Federal Reserve tightening.

The Insurance Sector Hit

Hardening yields were felt the most in the insurance group, as the BSE Insurance index fell 2% to end the week at 1,486.5 points. As of August 31, the NSE's Nifty Insurance gauge was already down by 10.5 per cent in the year leading up to the date.

The three stocks together — SBI Life, HDFC Life and Life Insurance Corporation of India — accounted for more than 52 per cent of the index's weight.

The weekly list of Sector Losers

In the week, Bharti Airtel Ltd was the worst performer among the Nifty stocks with a 5.70 per cent loss, followed by Trent Ltd with a loss of 5.48 per cent, Infosys Ltd ended 4.87 per cent lower, Bajaj Finserv Ltd was 4.40 per cent down and Tata Motors Passenger Vehicles Ltd was 4.39 per cent lower.

Analyst Reactions

Investors continued to keep a close watch on high crude oil prices, foreign selling pressure and high global yields, which helped the recovery to remain limited, while oversold holdings in the bigcap stocks across sectors offered some cushion.

The Technical Picture

Religare Broking's Mishra commented that the Nifty has managed to stay above the 23,000 psychological support level and bounced off the day lows, but the overall trend after Thursday's breakdown looks weak and the 23,300–23,350 zone will now form resistance while 23,000 will continue to act as a support for the near term.

The Road Ahead

The market is expected to remain cautious, given the near 5.2 per cent US Treasury yields, the RBI's policy meeting this October and crude prices. The balance between higher crude oil prices, lower US Treasury yields and consistent selling by FIIs and buying by DIIs has been the key market drivers during the past week.