Stock Market Faces Minor Setback Amid Inflation Concerns and Global Slowdown

Domestic stock indices ended Wednesday in negative territory, influenced by widespread sectoral declines and profit booking. Investors remain alert, waiting for US CPI and domestic inflation data, amidst signs of economic slowdown in China. Experts emphasize close monitoring of key inflation indicators for market guidance.

Domestic stock indices closed on Wednesday in the red, dragged by a broad-based fall in nearly all sectoral indices, notably in media, metal, PSU bank, realty, oil, and gas. Analysts cited profit booking at higher levels as a factor dampening investor sentiment. At the closing, Sensex was at 81,523.16 points, down 398.13 points or 0.49 percent, while Nifty stood at 24,918.45 points, losing 122.65 points or 0.49 percent.

The domestic market experienced a minor consolidation in line with Asian peers due to the correction of commodity prices. Market sentiment remained cautious owing to the slowdown in the Chinese economy. Investors are now awaiting the release of the US Consumer Price Index (CPI) and domestic inflation data, said Vinod Nair, Head of Research at Geojit Financial Services. Benchmark indices witnessed profit booking at higher levels today, mentioned Shrikant Chouhan, Head of Equity Research at Kotak Securities.

Domestic stock indices rose significantly on Monday and Tuesday, possibly driven by inherent strength in market fundamentals and persistent buying by foreign portfolio investors (FPIs), which helped cushion the indices from relative weakness in the US market. As the week progresses, markets will be closely monitoring retail and wholesale inflation data for fresh cues. India's retail inflation rate, which breached 5 percent in June, softened significantly to 3.54 percent in July, according to data from the Ministry of Statistics and Programme Implementation.

Inflation remains a concern for many global economies, but India has managed to handle its inflation trajectory relatively well. Despite recent pauses, the Reserve Bank of India has raised the repo rate by a cumulative 250 basis points since May 2022 to combat inflation. Later this week, investor caution is expected ahead of the US inflation report for August, which could impact the Federal Reserve's upcoming monetary policy decision.

(With inputs from agencies.)