Despite positive global indicators such as overnight rise in Wall Street indices and 0.6 percent gain in Morgan Stanley Composite Index of MSCI for Asia-Pacific (outside Japan), trade in Dalal Street on Thursday was spoiled by mid-session volatility which wiped out early morning gains in the 30-scrip Sensitive Index of Bombay Stock Exchange and 50-stock Nifty of National Stock Exchange.

Analysts say market participants were circumspect ahead of the announcement of inflation, fiscal deficit and export-import data.

Equity and currency markets are also looking forward to polling in the bitterly-fought Karnataka Assembly election for which votes will be cast on Saturday and results will be declared on 15 May.

Analysts, hesitant to predict outcome, say the benchmarks are likely to jump only in case the BJP wrests power from Indian National Congress as was witnessed umpteen times in the past.

Energy or power and private bank shares were in demand as investors opted for these scrips on increasing crude oil prices and increase in 10-year Treasury bonds across the continents. Oil and Natural Gas Corporation and Reliance Industries Limited were among top gainers.

Analysts cite increase in America’s bond yield to a multi-year high of 3 percent. These evolving global developments have impacted the partially convertible rupee and debt market.

Brent Crude futures continue to stay high and are likely to touch $78 per barrel, say analysts. Regardless of sustained upside momentum in oil prices, Sensex in morning deals surged to an intra-day high of 35,500.76 (+181.41) points and Nifty touched 10,785.55 (+43.85) points before selling pressure by speculators set in. The BSE benchmark closed 35,246.27 (-73.08) points down 0.21 percent and Nifty at 10,716.55 (-25.15) points declined 0.23 percent.

Bank Nifty lost steam in the last 30 minutes and slipped into the red losing 0.09 per cent at 26,131, (-23.45) points.

Brokerages have affirmed that Sensex and Nifty continue to be bullish on stock specific action — either buy or sell—in view of common global concerns over crude prices and debt market volatility.

They point out the shares have not nosedived because globally earnings data are meeting market estimates.

The improvement in corporate earnings is sustaining the upside in Sensex and Nifty. But, analysts say, it would be hard to predict how long such a rally can be sustained if the geopolitical situation created by America ditching its Western allies by walking out of the Iran nuclear deal takes an ugly or explosive turn.

Investment expert Mark Mobius who left Franklin Templeton to set up Capital Partners, says if conditions worsen, emerging markets would be bigger losers as foreign portfolio investors would expedite withdrawal of their invested funds.

Mobius in particular, expects risk-averse Pensions Fund to sell and trim their exposures.

These funds will sell in developed as well as developing economies, he predicts.

FPIs have been off-loading their stocks in Dalal Street since 2 May and up to 7 May — in five sessions — they sold shares worth Rs 3,739 crore. The modest rally is chugging along on buying by domestic funds that have invested Rs 3,296.41 crore in these five sessions.

Analysts say FPIs which were in total command of business in Dalal Street are now playing second fiddle to DIIs as is being seen since 2017 when mutual funds were flush with liquidity.

With a few days left for Q4 FY 2017-18 earnings season to end, the market participants will now look for a fresh trigger to keep positive momentum intact.

That makes the outcome of the Karnataka election results so important for the market.

But any let up in selling or profit booking by FPIs is unlikely unless the global geopolitical situation eases.

In the Sensex pack, nine shares were up and 22 were down. For the Nifty, the advance-decline ratio stood at 15 versus 35.