Sensex posts third straight weekly gain despite 660-point drop on Friday

Gains in RIL propelled market during the week

The benchmark Sensex fell over 660 points from the day’s high on Friday, but managed to eke out its third straight weekly gain.

Weak US employment data and sustained gains in index heavyweight Reliance Industries (RIL) lifted benchmark indices by more than a per cent on Friday. However, a sell-off during the last hour of trade saw the indices give up all the gains and ended the session marginally lower from the previous day's close.

The Sensex closed at 55,769, with a decline of 49 points or 0.09 per cent. The Nifty, on the other hand, ended the session at 16,584.3, a decline of 43 points or 0.3 per cent. Both the indices gained over 1.5 per cent during the week thanks to a near 8 per cent jump in shares of RIL.

The US private payroll data report, released on Thursday, showed that jobs rose by 128,000 in May, much lower than expected. Analysts said if the US Labour department's more comprehensive job report shows a similar declining trend like the private payrolls data, then the Fed might moderate the pace of hiking rates.

Investors continue to worry about whether the pace of interest rate hikes and monetary tightening by the Federal Reserve will push the  US economy into recession.

Meanwhile, the vice-chair of the Federal Reserve on Thursday indicated that the central bank might extend its half-point rate rises if they don't see any deceleration in monthly inflation prints.

Brainard's statement comes just weeks after the Fed implemented its first half-point rate rise in 22 years to fight inflation. For most of last year, the US central bank termed inflation a transitory phenomenon.

Analysts said the Fed is likely to implement half-point rate rises at its upcoming meetings in June and July. And With no meeting in August, the Fed might extend it into September.

"Persistent worries on rising interest rates, elevated crude oil prices, and liquidity tightening are keeping the upside in check. Markets will likely remain in a broader range as we continue to monitor global cues, including geopolitical developments, crude oil price movement, and institutional flows. RBI's monetary policy meeting next week will be a key event that investors will track,' said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services.

Experts said economic growth and inflation would determine the market's trajectory.

"The recovery in the global indices combined with bargain hunting on the domestic front has helped the index witness a rebound recently. However, this move lacks decisiveness due to lingering issues like inflation, geopolitical tension, etc. We recommend booking profit on the rise due to a strong hurdle at 16,900 in Nifty and waiting for further clarity. On the other hand, stocks are offering opportunities on both sides, so traders should align their positions accordingly," said Ajit Mishra, VP of research, Religare.

The market breadth was weak, with 2,029 stocks declining and 1,308 advancing. Close to two-thirds of Sensex stocks declined. Ultratech Cement declined the most amongst Sensex constituents and fell 5.5 per cent. RIL rose 2 per cent, most among Sensex components. Shares of LIC ended at Rs 800, its lowest close since its listing. Power stocks declined the most, and its sectoral index fell the most amongst sectoral indices on BSE.