Equity markets opened lower on Wednesday, with the Sensex opening at 78,319.45, up from its previous close of 78,199.11, but is currently trading lower at 77,936.33, down by 262.78 points or 0.34 per cent. Similarly, the Nifty opened higher at 23,746.65 compared to its previous close of 23,707.90 but slipped to 23,633.40, losing 74.50 points or 0.31 per cent.

The selloff was triggered by strong US economic data that raised concerns about delayed interest rate cuts by the Federal Reserve. “The US 10-year bond yield has spiked to 4.67 per cent on better-than-expected jobs numbers and indications of the services sector doing very well. This means the Fed may hold rates in January leading to further strengthening of the dollar and rising bond yields,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Foreign institutional investors (FIIs) remained net sellers, offloading equities worth Rs 1,491.46 crore on January 7, while domestic institutional investors bought shares worth Rs 1,615.28 crore. The total FII outflow for 2024 has now crossed Rs 3,06,000 crore.

Healthcare and energy stocks showed strength in early trade, with Dr. Reddy’s Laboratories leading the gainers, up 3.24 per cent, followed by ONGC (+1.79 per cent), Reliance Industries (+1.30 per cent), Cipla (+0.90 per cent), and Axis Bank (+0.77 per cent). On the flip side, Trent led the losses, falling 3.13 per cent, followed by Shriram Finance (-2.32 per cent), Bharat Electronics (-1.95 per cent), Adani Ports (-1.77 per cent), and Titan Company (-1.07 per cent).

The oil and gas sector remained in focus as crude oil prices rose towards $75 per barrel, approaching three-month highs amid signs of declining US crude inventories. “Oil prices have recently risen as a result of tighter global supplies caused by escalating Western sanctions on Russia and Iran, which has boosted demand for Middle Eastern oil,” noted Rahul Kalantri, VP Commodities at Mehta Equities.

Gold prices held steady near $2,650 an ounce as traders balanced reduced expectations for aggressive US rate cuts against growing haven demand. “Gold gained some support amid uncertainty about tariff policy ahead of Trump’s inauguration, and the PBoC added gold to its reserves for the second month in a row,” Kalantri added.

Technical analysts suggest caution in the current market environment. “The Nifty’s rally in the previous session helped trace a so-called ‘bullish harami’ pattern, but the long upper shadow meant nervousness persists. Bulls will have to push the market above yesterday’s high of 23,795 to validate the formation,” said Akshay Chinchalkar, Head of Research at Axis Securities.

Looking ahead, market participants will closely watch the US Federal Reserve’s minutes of meeting release later today. “In this macro setting, FIIs are likely to continue selling, putting pressure on the market. Large caps, despite fair valuations, may continue to be defensive. Investors can take a slightly long-term view of the market and buy largecaps in financials, IT, pharmaceuticals and select autos,” Vijayakumar suggested.

Notably, several stocks will be added to NSE F&O from January 31, including Castrol India, Gland Pharma, NBCC India, The Phoenix Mills, Solar Industries India, and Torrent Power. The market will also keep an eye on IT stocks as TCS is scheduled to announce its quarterly results tomorrow.