• This rise aligns with U.S. inflation data, boosting expectations of a Federal Reserve rate cut in December.
• Despite a small expected bounce, overall market trajectory remains uncertain due to rising domestic inflation and concerns over corporate earnings.
• Meanwhile, Wall Street equities closed slightly higher overnight, with the odds of a December rate cut rising to about 83%.

Indian shares opened marginally higher on Thursday, after sinking into correction territory in the previous session, with Eicher Motors driving the gains in the blue-chip indexes following a better-than expected quarterly profit.

The NSE Nifty 50 rose 0.26% to 23,620.6 as of 9:25 a.m. IST, while the BSE Sensex gained 0.2% to 77,848.23. Nine of the 13 major sectors advanced. The broader small- and mid-caps jumped about 1.4% and 0.7%, respectively. 

In the previous session, the Nifty and BSE Sensex experienced the largest single-day drop in nearly six weeks, losing about 1.3% each. This was primarily due to rising domestic inflation, which has dampened hopes of a rate cut by the Reserve Bank of India (RBI) in the near term. This, coupled with concerns over lackluster corporate earnings and $15 billion foreign outflows in the last 33 sessions, has added to the market's worries.

The Nifty closed 10.34% below the record high it hit on Sept. 27, confirming a technical correction, with the Sensex also flirting with the correction territory. The broader small- and mid-caps also ended their last session more than 10% below the record highs they hit on Sept. 6 and Sept. 24, respectively.

Aditya Gaggar, director of Progressive Shares, had warned that while there might be a small bounce after the drop in the last two sessions, the market's undertone is bearish, and any rise is likely to be short-lived.

Market Weakness and Foreign Outflows

The market weakness, which pulled the Nifty down 10% from its record high on Sept. 27, confirming the correction, has been due to underwhelming corporate earnings and massive foreign outflows, worth $15 billion in the last 33 sessions. Adding to the market's woes, data earlier this week showed a jump in inflation, stoking fears of a consumption slowdown and dampening hopes of a rate cut in the near term.

In the region, China dragged the broader Asian shares lower on the day as investors remained unimpressed by Beijing's latest stimulus measures to support the economy. The Indian markets had declined for the 5th straight session on Wednesday, November 13, due to weak global trends, a rise in the dollar index, a weakening rupee, and continuous foreign investor selling.

The Sensex fell 1,015.53 points or 1.3 per cent to the day's low of 77,659.65 while the broader Nifty lost 338 points or 1.4 per cent to its intra-day low of 23,545.50. Both benchmarks are over 10 per cent away from their respective record highs, hit in September. Just in these five sessions alone, the indices have lost almost 4 per cent.

Investor Caution and Sector Performance

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, explained that the rise in the dollar index and the sharp spike in the US 10-year bond yield to 4.42% are causes of concern. Such high yields in US bonds will facilitate more outflows from emerging markets to the US. "This will continue to be a headwind for India. Investors should be cautious in investing in sectors like cement, metals and petroleum refining which are facing a growth slowdown," said Vijayakumar. "Safety is in sectors like banking, new-age digital companies, hotels, pharma and IT where growth prospects are good," he advised.

In the Sensex pack, only four stocks were in the green - Tata Motors, NTPC, Asian Paints and Infosys- while the remaining 26 traded in the red. M&M, Tata Steel, Adani Ports, JSW Steel, and IndusInd Bank were the top losers. All sectoral indices were in the red for the day. Nifty Realty shed the most 3.2 per cent followed by Nifty PSU 3 Bank, which lost 2.2 per cent and Nifty Metal, down 2.66 per cent.

Meanwhile, Nifty Bank, Nifty Auto, and Nifty Media also fell over 2 per cent each. Nifty Financial Services, Nifty Pharma, and Nifty Oil and Gas also declined between over 1.5 per cent each. Nifty IT an Nifty FMCG fell the least, down 0.5 per cent each.

A long bull candle was formed on Nifty's daily chart, indicating an attempt of an upside breakout of smaller range movement. The index has bounced back and is now placed near the upper range of 25,200 levels. This suggests that the market may be trying to recover from its recent losses, but it remains to be seen if this recovery will be sustained.