Indian stocks slip as oil, inflation cap weekly rally

Indian share benchmarks declined on Friday, trimming weekly gains, as elevated crude prices and inflationary pressures weighed on sentiment, countering the support from sustained foreign institutional inflows.

It was a turbulent week for global markets as AI bellwether Nvidia plunged following revelations of Jensen Huang’s extramarital affairs and his subsequent exit from the company, while investors also came to terms with changing US political equations.

While Indian stocks gained from market reactions to US midterm election results earlier in the week, headwinds from the Middle East war threatened the nascent recovery.

Retail inflation breached the upper end of the Reserve Bank of India’s 2%-6% tolerance range in October, fuelling expectations of further monetary tightening. Brent crude rose on Friday, as attacks in the Middle East continued.

“For Indian markets, higher inflation implies higher bond yields, tighter liquidity, and greater valuation pressure on rate-sensitive sectors such as banks, real estate, autos, and capital-intensive infrastructure,” said Vinit Bolinjkar, head of research at Ventura.

Nifty 50 fell 0.61% to 25,144.3 and Sensex edged 0.39% lower to 81,592.45.

Financials, banks and private banks fell 0.7%-0.8%, dragging benchmarks down on the session.

For the week, Nifty 50 and Sensex rose 0.5% and 0.7% after posting their strongest weekly gains in more than six years last week.

Roughly $8 billion in foreign inflows so far in November, the highest for a month since December 2020, driven by an AI-trade unwind and lower oil prices, supported equities.

Thirteen of the 16 major sectors logged weekly gains. The broader small-caps and mid-caps rose 3.6% and 2.1%, respectively.

“Equities may face near-term volatility as investors reprice policy expectations, though resilient domestic growth and strong corporate earnings can provide some support,” said Ventura’s Bolinjkar.

Among individual stocks, State Bank of India rose 6% this week, extending its rally after posting upbeat quarterly results last week.

The IT index fell 3.2% this week, snapping a six-week winning streak that had lifted it 17.1% as investors rotated out of AI-linked trades.

Paytm closed at a record high after receiving preliminary RBI approval for its payments services unit to issue prepaid payment products.