Markets dip as inflation rises to 14-month high and foreign outflows persist

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Equity markets declined in early trading on Wednesday as inflation soared to a 14-month high of 6.21 per cent in October, further weighed down by continued foreign fund outflows, according to PTI. Market sentiment was also dampened by muted quarterly earnings and weak trends in global markets, traders noted.

As per PTI, the BSE benchmark Sensex fell by 239.69 points to reach 78,435.49 in early trade, while the NSE Nifty dropped 103.15 points to 23,780.30. Within the 30-share Sensex pack, leading decliners included Mahindra & Mahindra, Maruti, Tata Steel, Sun Pharma, Nestle, and ITC. On the other hand, Titan, HDFC Bank, Bharti Airtel, and NTPC were among the few shares that saw gains.

The spike in inflation, which surpassed the Reserve Bank of India's (RBI) upper tolerance threshold, was attributed primarily to rising food prices, a significant concern for policymakers and investors alike. PTI highlighted that retail inflation's reach of 6.21 per cent in October is the highest it has been in over a year, underscoring inflationary pressures in the economy.

Additionally, foreign institutional investors (FIIs) continued their withdrawal from Indian equities, offloading shares worth Rs 3,024.31 crore on Tuesday, exchange data revealed. This trend of foreign fund outflows has been a persistent source of pressure on the markets, reducing liquidity and dampening investor sentiment. The exodus by FIIs is seen as partly driven by concerns over global interest rates and inflationary pressures.

Asian markets mirrored this sombre mood, with Seoul, Tokyo, Shanghai, and Hong Kong trading lower on Wednesday. Additionally, US markets ended in negative territory on Tuesday, contributing to the downward pressure on global equities and feeding into investor concerns about slowing growth and rising costs. PTI also noted that the global oil benchmark, Brent crude, edged up by 0.35 per cent to USD 72.14 per barrel, further weighing on market sentiment given the impact of fuel costs on inflation.

On the previous day, the BSE benchmark Sensex tumbled by 820.97 points or 1.03 per cent to close at 78,675.18, while the Nifty saw a drop of 257.85 points or 1.07 per cent, settling at 23,883.45.

According to PTI, traders believe that this volatility could persist in the near term as inflationary pressures, global fund flows, and earnings uncertainties continue to dominate investor sentiment. With inflation breaching comfort levels and FIIs retreating, the Indian market outlook remains cautious amidst the broader global economic challenges.

(With inputs from PTI)