The BSE market capitalisation slipped Rs 4.8 lakh crore to Rs 254.83 lakh crore from Rs 259.64 lakh crore a day ago. About 2,320 stocks on the bourse were down, 447 up and 76 were unchanged.
Despite some recovery, the midcap and smallcap indices were still down up to 2 per cent. The benchmarks Sensex and Nifty50 fell just over 1 per cent, broadly outperforming Asian peers, which were down up to 4 per cent.
Here are a few factors weighing on the market:
On Thursday, the Bank of England warned that the UK economy could shrink in 2023 and projected a 10 per cent-plus inflation, as it increased interest rate by a quarter basis points.
A day earlier, the US Fed had increased its policy rate by 50 basis points, the biggest in 22 years, even as the US GDP shrank 1.4 per cent for the March quarter. In India too, the RBI increased the policy rate by 40 basis points, along with an increase in the cash reserve ratio.
Oil prices climbed for a third straight session on Friday, shrugging off concerns about global economic growth as worries about tightening supplies underpinned prices ahead of an impending European Union embargo on Russian oil.
On Thursday, OPEC+ agreed to only a modest monthly oil output increase, arguing that the producer group could not be blamed for disruptions to Russian supply and saying China’s coronavirus lockdowns threatened the outlook for demand.
- Weak US economic readings
Data released in the US suggests initial jobless claims there ticked up to 200,000 last week amid continued labour market tightness.
May is the eighth straight month when foreign investors are net sellers of domestic equities. This is even as the monthly outflows have fallen from a recent peak of Rs 41,123 crore in March.
A rise in interest rates in the US is pushing the dollar up. The US dollar and risky assets, such as emerging market equities, have an inverse relationship. Data showed the institutional class is a net seller to the tune of Rs 4,857 crore in May so far.
Investors were also keenly awaiting the earnings of market heavyweight Reliance Industries.
“The stock has been a standout performer over the last 12 months; valuations of 18 times FY24 PE, 10.5 times EV/Ebitda and 1.8 times P/BV factor in the upsides, with near-term stress on return ratios owing to stronger-than-estimated capital allocations/challenges inherent in scaling up of new energy plans, making us cautious on material upsides hereon,” ICICI Securities said in a May 5 note.
Besides, there were concerns that investors may pull money out of secondary market to subscribe to LIC IPO. The Rs 20,557 crore issue was already 103 per cent subscribed by the end of its second day, with the categories for employees and policyholders receiving double and triple the bids compared to the shares reserved.