Benchmark equity indices traded in a narrow range on Thursday as investors assessed the US Federal Reserve's latest policy decision and its hawkish commentary, while gains in information technology stocks helped offset weakness in the broader market.
At 9:21 am, the BSE Sensex was up 15.96 points, or 0.02 per cent, at 77,670.56, while the NSE Nifty50 gained 22.25 points, or 0.09 per cent, to trade at 24,272.45 after touching an intraday high of 24,273.45.
Market breadth remained weak despite the benchmarks staying in positive territory. Eleven of the 16 major sectoral indices traded lower, while broader markets underperformed. The Nifty Midcap 100 and Nifty Smallcap 100 were down around 0.3 per cent each, while India VIX rose 1.04 per cent, reflecting a cautious market mood.
Information technology stocks provided the biggest support, extending their rally for a fifth straight session.
The Nifty IT index climbed 1.87 per cent to emerge as the top-performing sector in early trade. Infosys gained 2.55 per cent, Tech Mahindra advanced 1.68 per cent, HCLTech rose 1.37 per cent and TCS added 1.28 per cent, helping counter losses in banking and consumption stocks.
Among the Sensex constituents, Infosys led the gainers, followed by Tech Mahindra, HCLTech, TCS, Sun Pharma and Mahindra & Mahindra. On the downside, Asian Paints dropped nearly 3 per cent, Adani Ports fell 2.75 per cent, Eternal declined 1.67 per cent, InterGlobe Aviation (IndiGo) slipped 1.17 per cent and Axis Bank lost 0.86 per cent.
IT stocks continued to outperform as investors remained optimistic about the sector following a global shift away from AI-linked semiconductor stocks. Market participants also expect the Fed's decision to leave interest rates unchanged to support technology spending in the US, the largest market for Indian IT services companies.
However, the Fed's accompanying commentary kept investors cautious. Although the central bank left interest rates unchanged as expected, Chair Kevin Warsh reiterated its commitment to controlling inflation. The policy decision also witnessed dissent from three of the 12 voting members, an unusually high number that strengthened expectations of another rate hike in the coming months.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the Indian market continued to indicate the possibility of a breakout despite several global challenges.
"The Indian market construct indicates a breakout trend. But the potential breakout is being constrained by many headwinds. The spike in Brent crude again to near $90 following the escalation of the US-Iran conflict is a strong headwind," he said.
Commenting on the Fed's decision, Vijayakumar said the split verdict had been viewed negatively by global markets.
"Fed's decision to pause rates yesterday, though expected, turned out to be negative for equity markets since the decision was a 9-3 split decision with three members voting for a rate hike to control inflation. This split decision indicates that a rate hike may come soon. Consequently, bond yields increased, impacting equity markets which saw a 2% selloff in the S&P 500," he said.
He, however, said India appeared better positioned than many global markets.
"The Indian market is likely to respond differently since the selloff in chip stocks and FPIs turning buyers in India, so far in July, are turning favourable for the Indian market. KOSPI is down 31% during the last one month and FPIs have turned big sellers in chip stocks. The Indian economy continues to be resilient and this will provide fundamental support to the market," Vijayakumar added.
Meanwhile, crude oil prices eased after Wednesday's sharp rally. Brent crude fell 1.26 per cent to $89.60 per barrel, while WTI crude declined 0.95 per cent to $83.66, offering some relief on the inflation front despite continued geopolitical tensions in the Middle East.
