Midday Market Report: Sensex, Nifty dip ahead of key economic data; IT stocks shine

Sensex and Nifty dipped in midday trade on December 12, with investors exercising caution ahead of India's inflation (CPI) and industrial production (IIP) data, set to be released later today. The expiry of weekly derivatives contracts also added to market volatility.

At 12:55 PM, the Sensex fell by 213 points or 0.3 per cent to 81,342, while the Nifty declined by 81 points or 0.3 per cent to 24,560. Declining stocks outnumbered advancers, with 2,214 shares down and 1,164 up.

IT sector leads gains amid Fed optimism

The Nifty IT index emerged as the standout performer, rising over 1 per cent with all 10 constituents trading in the green. The gains were fueled by expectations of a potential U.S. Federal Reserve rate cut following in-line inflation data."A potential Fed rate cut is favourable for Indian IT companies, as a significant portion of their revenue comes from the U.S." highlighted V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Pressure on oil & gas, auto, and FMCG sectors

The Nifty Oil & Gas index slipped 0.5 per cent, weighed down by stocks like Reliance Industries, ONGC, and BPCL. The auto index dropped 0.9 per cent, with Tata Motors, Maruti Suzuki, and Eicher Motors leading the losses. Meanwhile, the FMCG index declined 0.8 pe rcent, as HUL, Tata Consumer, and ITC came under selling pressure.

Broader markets retreat after weeks of outperformance

Broader markets also witnessed a pullback, with the BSE Midcap and Smallcap indices falling 0.6 per cent and 1 per cent, respectively. "The mid-cap and small-cap space, which has shown significant momentum recently, now appears to be in the overbought zone," said Ruchit Jain, Vice President, of Motilal Oswal Financial Services. He advised adopting a "buy on dips" strategy in this segment.

Global cues and economic outlook

U.S. inflation data released on December 11 showed a 0.3 per cent month-over-month and 2.7 per cent year-over-year rise in the CPI, aligning with expectations. The CME FedWatch Tool indicates a 99 per cent probability of a 25-basis-point Fed rate cut in the December 17–18 meeting.

On the domestic front, the upcoming CPI data is expected to provide key insights into inflation trends, which could influence the Reserve Bank of India's future policy decisions.