Sensex and Nifty 50 open subdued amid global uncertainty

Sensex edged up by 0.09 per cent to 81,786

MUMBAI: BSE Sensex and NSE Nifty 50 opened on Wednesday, August 28, on a subdued note in a lackluster market weighed down by concerns over escalating geopolitical tensions and uncertainty surrounding a potential Fed rate cut.

At the opening bell, the BSE Sensex edged up by 0.09 per cent to 81,786, while the Nifty 50 saw a marginal increase of 0.02 per cet, reaching 25,023.

Asian markets

Asian markets mirrored this cautious sentiment, trading within tight ranges following a sluggish day on Wall Street, as investors braced for a series of earnings reports in the US that could influence risk appetite.

The ASX200 declined by 0.47 per cent ahead of Australia’s inflation data release, while Japan’s Nikkei fell by 0.21 per cent, and South Korea’s Kospi dropped by 0.27 per cent.

The global market’s focus is now on the anticipated start of the Federal Reserve’s monetary policy easing.

This follows a statement by Fed Chair Jerome Powell last Friday, indicating that the central bank is ready to begin cutting interest rates.

Wall Street ends with gains

On Wall Street, the major indexes ended the day with modest gains amid choppy trading. The Dow Jones Industrial Average inched up by 0.02 per cent to close at 41,250.50, the S&P 500 added 0.16 per cent to reach 5,625.80, and the Nasdaq Composite rose by 0.16 per cent, finishing at 17,754.82.

European markets also closed slightly higher, up by 0.16 per cent, buoyed by a late rally in Japan’s Nikkei index, which ended 0.47 per cent higher.

Gold up

Gold prices remained strong, trading above $2,500 per ounce, driven by expectations of a rate cut and ongoing concerns about the Middle East conflict.

In economic news, US consumer confidence reached a six-month high in August, although there is growing anxiety about the labor market. The Personal Consumption Expenditures (PCE) price index, a key inflation measure favored by the Fed, is due on Friday and may further influence market expectations regarding the Fed’s next moves.

Oil down

Oil prices saw a decline, with Brent futures settling 2.3 per cent lower at $79.55 per barrel, while US crude dropped 2.4 per cent to $75.53.

On the domestic front, foreign institutional investors (FIIs) purchased shares worth Rs 1,503.76 crore on August 27, while domestic institutional investors (DIIs) sold shares amounting to Rs 604.08 crore.

Analyst’s view

According to the research head of a leading brokerage firm, the market has entered a consolidation phase characterized by low volatility, a trend expected to persist in the near term. The decline in US bond yields has curbed FII selling, and they have even become marginal buyers.

Historically, DIIs tend to sell when FIIs are buying, which is likely to keep the market within a range with a slight upward bias. This is considered a healthy trend, particularly given the current elevated market valuations.

However, the ongoing bull market has led to certain excesses. Retail investors are increasingly chasing mid and small-cap stocks without regard for valuations, and there is hyper-speculative activity in the futures and options (F&O) and intra-day trading segments.

Of particular concern is the irrational and speculative frenzy in the SME segment, where IPOs of some SMEs—lacking track records and with questionable financials—are being oversubscribed many times over. Retail investors, hoping for quick gains from these IPOs, are contributing to an unhealthy trend that could ultimately lead to significant losses, he added