Sensex, Nifty inch lower in early trade; metals, pharma stocks rally

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Equity benchmarks Sensex and Nifty 50 opened in the red on Friday as investors weighed hawkish Federal Reserve comments ahead of the Jackson Hole symposium and geopolitical tension following the blasts in Afghanistan. In early deals, Sensex lost 67.12 points or 0.12% at 55,881.98, while the Nifty 50 declined 6.95 points or 0.04% at 16,629.95.

“Markets appear tantalizingly poised with the possibility of a swing in September. This can be on the downside if the trigger comes from a hawkish Fed speak from the Jackson Hole symposium. Covid cases rising, though slowly, too can turn out to be a dampener. The elephant in the room is the sustained FII selling which touched Rs 1974 cr in the cash market yesterday. It would be difficult for retail and DIIs to absorb the selling from FIIs, which might aggravate if the message from the Fed chief tonight is hawkish. Risk-reward appear to be not on the side of bulls,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The Nifty is held up by sector rotation. In recent days FMCG has emerged as a pillar of support to Nifty with HUL, Nestle, Britannia and Tata Consumer emerging strong. While this sector rotation is keeping the Nifty strong the pain in the broader market continues with mid-and small-caps bleeding this month. This removal of froth is desirable and will make the broader market healthy. It would be good to lighten positions ahead of the Fed message. Investors may remain invested in large-cap IT which is the strongest pillar of this market, the top names in FMCG, high-quality financials, pharma, chemicals and construction-related segments. Extreme care should be exercised in committing additional money at this stage in this richly valued market. added Vijayakumar.

Sectoral strand

Sectoral indices on the NSE were mixed. The Nifty Metal advanced 1.11%, Nifty Realty rose 0.48% and Nifty FMCG and Nifty Pharma indices were up 0.10% and 0.08%, respectively.

On the other hand, Nifty Bank, Nifty IT and Nifty Auto indices were in the red.

Broader market

The broader markets were also trading flat. The BSE MidCap index opened flat with a negative bias of 6 points or 0.03% at 23,008 level and the BSE SmallCap index was quoting at 26,012 up by 0.11%.

The market breadth was flat as 1,217 shares advanced compared to 1,202 declined and 106 remained unchanged.

Global markets

Overseas, Asian stocks are trading mixed on Friday as investors remained cautious ahead of the Federal Reserve’s annual Jackson Hole symposium and geopolitical tension over Afghanistan.

In US, the S&P 500 fell from a record on Thursday as investors awaited more details on the Federal Reserve’s plan to pull back on monetary stimulus from the central bank’s annual symposium on Friday.

Traders were also eying new developments in Afghanistan, which added to the risk-off sentiment. The Pentagon reportedly confirmed 12 U.S. service members were killed and 15 wounded after two explosions went off outside the Kabul airport Thursday.

Federal Reserve Chairman Jerome Powell is slated to make remarks on Friday as part of the central bank’s summit. The Fed has been purchasing at least $120 billion of bonds per month to bolster the economy in reaction to the pandemic.