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Tech stocks tumble, dragging Sensex 203 pts lower, Nifty below 23,300 on US rate fears

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Sensex and Nifty50 closed in the red in a volatile session on Monday after hitting record highs, dragged by financial and IT stocks due to US rate cut concerns.

State-owned firms reported gains a day after Prime Minister Narendra Modi was sworn in for a rare third term.

The BSE benchmark Sensex declined 203 points or 0.27% to settle at 76,490. The broader NSE Nifty dropped 31 points or 0.13% to end at 23,259.

In Monday's trade, the Sensex hit a day's high of 77,079, while the Nifty 50 touched 23,411.9.

The IT index fell 1.83%, making it the top sectoral loser. Tech Mahindra, Infosys, Wipro, TCS, and HCLTech declined by 1%-3%, becoming the top losers on the Sensex.

The drop in IT shares, which earn a significant portion of their revenue from the US, followed stronger-than-expected US monthly jobs data, dampening expectations of early Federal Reserve rate cuts.

Nifty Metal index fell 0.4%, hurt by a stronger US dollar following the jobs data and mixed trade readings from top consumer China. A strong US dollar makes metals more expensive for buyers using other currencies.

Among individual stocks, KEC International ended 5.3% higher following the company's announcement of securing new orders worth Rs 1,061 crore across its various business segments.

Despite the headline indices ending in the red, the market capitalisation of all listed companies on the BSE surged by Rs 1.59 lakh crore to reach Rs 425.08 lakh crore. Market breadth favored the bulls, with about 2,625 stocks gaining, 1,364 declining, and 140 remaining unchanged on the BSE.

Expert Views

"The Indian market currently lacks fresh catalysts following the formation of the new government at the centre, suggesting that some consolidation may occur in the near term. Meanwhile, optimism about a rate cut is waning as US economic data points remain healthy. The Fed is expected to continue its current stance," said Vinod Nair, Head of Research, Geojit Financial Services.

Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities, said, "The Nifty Index encountered resistance at higher levels and was unable to close above the 23,300 mark. Immediate support for the index stands in the 23,000-22,900 zone, with a break below this range likely to trigger aggressive selling pressure. In the near term, the index is expected to consolidate within a broad range of 23,000-23,500."

Global Markets

World stocks were mostly lower on Monday after a US jobs report released Friday came in hotter than expected, while the euro fell after French President Emmanuel Macron dissolved the National Assembly following a setback in Sunday's parliamentary election. Far-right parties made major gains in parliamentary elections Sunday, leading French President Emmanuel Macron to call a snap election. This caused the euro to drop to its lowest price in nearly a month.

The setbacks for incumbent parties cast a shadow across the region. The CAC 40 in Paris sank 1.7% to 7,866.87 and Germany's DAX lost 0.7% to 18,425.26. Britain's FTSE 100 declined 0.4% to 8,215.84 in early trading.

The future for the S&P 500 shed 0.1% and that for the Dow Jones Industrial Average was down 0.2%.

Oil Prices Rise

Oil prices edged up on Monday, buoyed by hopes of rising fuel demand this summer, though gains were capped by a strengthening of the dollar on receding expectations of imminent cuts to US interest rates.

Goldman Sachs analysts expect Brent to rise to $86 a barrel in the third quarter, saying in a report that solid summer transport demand will push the oil market into a third-quarter deficit of 1.3 million barrels per day (bpd).

Brent crude futures gained 16 cents, or 0.2%, to $79.78 a barrel. U.S. West Texas Intermediate crude futures were up 6 cents at $75.59.

Rupee Ends Lower

The Indian rupee ended weaker on Monday, weighed down by a rise in U.S. bond yields, but likely intervention by the Reserve Bank of India (RBI) helped limit the currency's losses.

The rupee closed at 83.5050 against the U.S. dollar, down 0.1% from its close at 83.3725 in the previous session. The currency hovered in a tight band between 83.48 and 83.51 following a gap-down opening.

(With inputs from agencies)

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