Nifty slips 0.17% as crude and expiry volatility offset RBI liquidity boost

Indian equities opened higher but gave up those gains as oil-related risk and late-session expiry volatility outweighed support from banks. Traders also cited the corporate action service-related adjustment during the closing auction for the sharp late move in the Sensex.

The market's breadth remained better than the headline indices suggested, while the leadership was concentrated in lenders, infrastructure and industrial shares. The immediate implication for the September 4 session is that liquidity support has improved the banking backdrop, but crude and geopolitical risk remain a constraint on broader risk appetite.

The Reserve Bank of India's special foreign-currency mobilisation measures generated $136.38 billion of inflows by August 31, according to reports citing the central bank. FCNR(B) deposits accounted for $127.23 billion, while overseas foreign-currency borrowings contributed $5.26 billion and external commercial borrowings added $3.89 billion.

Banks benefited from the resulting liquidity signal. HDFC Bank and Axis Bank were among the leading index gainers, while ICICI Bank and SBI also advanced. RBL Bank and IDFC First Bank gained after reports of large FCNR deposits. The reported inflows explain why lenders outperformed even as the broader market weakened.

Adani Ports was also identified among the stronger large-cap names, while Bharat Electronics, Tata Consumer Products and Bharti Airtel were among the other Sensex constituents that gained during the session. On the weaker side, Titan, Trent, ITC, Mahindra & Mahindra, Bajaj Finserv and HCL Technologies were cited among the major drags. The fall in IT was linked in market reports to selling pressure, while FMCG weakness was sharpened by concerns around Godrej Consumer Products' inventory position.

Overnight global cues were more supportive. US equities rose after Federal Reserve Governor Christopher Waller's comments reduced expectations of an imminent rate increase. The US 10-year Treasury yield fell to 4.756%, while the dollar index declined to 98.91. Lower US yields and a weaker dollar helped gold advance.

That relief was incomplete for India because Brent remained near $96 a barrel amid US-Iran tensions and concern about supply disruption. Higher crude is a direct risk for India's import bill and inflation, while it can also limit the benefit of a firmer rupee. Asian equities opened higher on September 4, with South Korea's Kospi and Japan's Nikkei in positive territory.

Foreign institutional investors were provisional net sellers of Rs 2,346 crore in Indian equities on September 3. Domestic institutional investors were net buyers of Rs 4,977 crore. The divergence matters because domestic flows continue to cushion the market, while foreign selling leaves the indices sensitive to global yields, oil and geopolitical headlines.

The RBI's foreign-currency mobilisation has two immediate market effects: it supports banking-system liquidity and strengthens the rupee. Reports put system liquidity at Rs 6.65 lakh crore, its highest level since May 2022. That is supportive for lenders and short-term funding conditions, although the benefit to equities is being offset by the oil shock and risk aversion.

The latest domestic activity data were mixed. HSBC's India Services PMI rose to 54.1 in August from 53.3 in July, but remained close to a four-year low and was below the preliminary estimate of 54.5. The composite PMI was 54.3. The data point to continued expansion, but not a broad acceleration in private-sector momentum.

Godrej Consumer Products reiterated its FY27 guidance at its analyst meet: high-single-digit India volume growth and double-digit consolidated revenue and operating-profit growth. Management also set out a longer-term ambition of double-digit volume growth and revenue and profit growth in the teens. The shares nevertheless weakened after analysts highlighted near-term investment, channel and inventory pressures, including a planned correction in general-trade inventory.

The reaction shows the difference between guidance and near-term execution concerns. Brokerages noted that organic unit-volume growth in India and international operations was 4%, while organic sales and operating-profit growth were in the 6% to 7% range. Those figures were reported in the context of the analyst meet; no consensus estimate for the period was available in the material.

Inox Wind rose after an order win, while Solar Industries India gained on reports of an international-market acquisition. IRFC's long-term issuer credit rating was upgraded to A- with a Stable outlook from BBB+ with a Stable outlook by JCR. No order value or financial result comparison was available for the Inox Wind or Solar Industries developments.

The primary-market calendar is active. Qualiance International's IPO opens on September 4 and remains open through September 8, with listing scheduled for September 11. ESDS Software Solution and Priority Jewels are scheduled to list on September 4 after their issues attracted strong demand. Rays of Belief's Rs 125 crore issue closed on September 3 with 76.24 times subscription, and allotment is due on September 4.

In the secondary market, DSDG Holding ApS sold 16.34 lakh CleanMax shares at Rs 1,220 each. ICICI Prudential Life and SBI Life bought 5.09 lakh shares each at the same price. Great Eastern Shipping's Rs 900 crore buyback begins on September 4, subject to a maximum price of Rs 1,530 per share.