Snapping their two-day gains, Indian equity benchmarks traded under pressure and finally settled around the day's low points on Wednesday amid selling across the sectors. After the flat start, key gauges gradually inched lower as the day progressed amid foreign fund outflows. Foreign institutional investors (FII) sold shares worth Rs 628.07 crore on January 3, as per provisional data available on the NSE. Market participants awaited a slew of U.S. data and the latest FOMC meeting minutes this week for additional clues on when and where interest rates might peak. Traders took a note of report that Micro-Finance Institution Network (MFIN), a self-regulatory organisation (SRO) recognised by RBI, said that outstanding loan portfolio of the micro-finance institution (MFI) sector across India will increase around 20.3 per cent at Rs 3.25 lakh crore in 2022-23 compared to the previous fiscal. Markets managed to trim some losses in late afternoon deals, taking support from reports that India's services sector growth expanded further in the month of December, with a quicker upturn in new business boosting output growth. More jobs were created and companies remained strongly upbeat towards the year-ahead outlook for business activity. As per the survey report, the seasonally adjusted S&P Global India Services PMI Business Activity Index surged to 58.5 in December from 56.4 in November. Further, the S&P Global India Composite PMI Output Index -- which measures both manufacturing and services -- improved to 59.4 in December from 56.7 in November. However, markers failed to hold recovery and ended with sharp cuts as traders shifted focus towards the upcoming quarterly earnings season, with IT giant TCS likely to unveil its earnings on January 9. Finally, the BSE Sensex fell 636.75 points or 1.04% to 60,657.45 and the CNX Nifty was down by 189.60 points or 1.04% to 18,042.95.

The US markets ended extremely volatile session higher on Wednesday as investors looked past Federal Reserve meeting minutes that showed the central bank will remain aggressive in its policy to tame high inflation. The Federal Reserve released the minutes of its December monetary policy meeting, reinforcing expectations the central bank is likely to continuing raising interest rates. The minutes reiterated that officials continue to anticipate that ongoing rate increases would be appropriate to achieve the Fed's dual objectives of maximum employment and price stability. The Fed noted that the pace of future rate hikes would take into account the cumulative tightening of monetary policy, the lags with which policy affects economic activity and inflation, and economic and financial developments. At the meeting, the Fed decided to raise interest rates by 50 basis points, which marked a slowdown in the pace of rate hikes following four consecutive 75 basis point increases. The central bank raised the target range for the federal funds rate to 4.25 to 4.50 percent, the highest level in 15 years. On the sectoral front, airline stocks moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 6.4 percent. Substantial strength was also visible among gold stocks, driving the NYSE Arca Gold Bugs Index up by 4.9 percent to a nearly seven-month closing high. The rally came as the price of gold for February delivery $12.90 to $1,859 an ounce. On the economic data front, the Institute for Supply Management (ISM) released a report showing U.S. manufacturing activity contracted at a slightly faster rate in the month of December. The ISM said its manufacturing PMI edged down to 48.4 in December from 49.0 in November, with a reading below 50 indicating a contraction. Street had expected the index to slip to 48.5. Manufacturing activity contracted for the second consecutive month after expanding for 29 straight months, with the manufacturing PMI falling to its lowest level since hitting 43.5 in May 2020.

Crude oil futures ended sharply lower on Wednesday, magnifying their previous session's losses, as worries about energy demand amid rising fears of a global recession continued to weigh on the commodity. Further, China's decision to increase export of refined oil products has fueled concerns of weaker demand in the country. Meanwhile, traders also took note of comment from former New York Federal Reserve President William Dudley, who said a recession in the U.S. is likely because of what the Fed has to do. Benchmark crude oil futures for February delivery fell $4.09 or 5.3 percent at $72.84 a barrel on the New York Mercantile Exchange. Brent crude for March delivery dropped $4.26 or 5.2 percent at $77.84 a barrel on London's Intercontinental Exchange.

Indian rupee strengthened against the dollar on Wednesday, supported by easing crude oil prices. Sentiments were upbeat after report stated that India's services sector growth expanded further in the month of December, with a quicker upturn in new business boosting output growth. More jobs were created and companies remained strongly upbeat towards the year-ahead outlook for business activity. As per the survey report, the seasonally adjusted S&P Global India Services PMI Business Activity Index surged to 58.5 in December from 56.4 in November. Further, the S&P Global India Composite PMI Output Index -- which measures both manufacturing and services -- improved to 59.4 in December from 56.7 in November. On the global front, dollar fell broadly on Wednesday, losing out to commodities currencies like the Australian dollar and against the euro, which got a lift from a raft of data that suggested European inflation may finally have peaked. Finally, the rupee ended at 82.82 (Provisional), stronger by 18 paise from its previous close of 83.00 on Tuesday.

The FIIs as per Wednesday's data were net sellers in both equity and debt segment. In equity segment, the gross buying was of Rs 3319.95 crore against gross selling of Rs 3576.23 crore, while in the debt segment, the gross purchase was of Rs 496.25 crore against gross selling of Rs 1329.24 crore. Besides, in the hybrid segment, the gross buying was of Rs 0.34 crore against gross selling of Rs 4.98 crore.

The US markets ended higher on Wednesday after a choppy session as investors looked past Federal Reserve meeting minutes that showed the central bank will remain aggressive in its policy to tame high inflation. Asian markets are trading mostly in green on Thursday following a higher close on Wall Street. Indian markets ended lower on Wednesday as a combination of foreign portfolio investors (FPIs) selling and a decline in index majors weighted on market sentiments. Loses in financial and oil, gas shares pulled the headline indices lower. Today, markets are likely to get positive start tracking gains in global markets. Traders will be taking encouragement with a private report lowering its projection for India's current account deficit (CAD) to 2.9% of gross domestic product (GDP) for the current fiscal year, citing the growth in the country's service exports and a lower oil price forecast. Some support will come as Bibek Debroy, chairman, Economic Advisory Council to the Prime Minister, said India's GDP will be close to USD 20 trillion by 2047 and per capita income may reach USD 10,000 (at current value of USD). Meanwhile, India and France are expected to take stock of their overall security cooperation during a high-level dialogue on January 05. However, continued foreign fund outflows likely to limit upside. Foreign institutional investors (FII) sold shares worth Rs 2,620.89 crore on January 4, as per provisional data available on the NSE. The weekly F&O expiry may lead to volatility in the markets today. Also, the markets would react to the FOMC minutes released overnight which suggests that the Fed will remain aggressive in its policy to control inflation. Some banking stocks will be in focus with a report that private sector banks are expected to report healthy growth in earnings during the October-December quarter of FY23. This would be aided by robust credit growth, margin expansion, benign credit costs, and lower provisioning burden. However, operational costs may remain high due to investment in businesses. There will be some reaction in tyre industry stocks Automotive Tyre Manufacturers Association said the Indian tyre industry will be able to scale a turnover of Rs 1 lakh crore in the next three years on the back of new capacities available.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• IndusInd Bank's net advances stood at Rs 2,71,966 crore as of December 31, 2022, posting a 19% rise in YoY terms as against Rs 2,28,583 crore as of December 31, 2021. 
• HDFC Bank is partnering with Microsoft in the next phase of its digital transformation. 
• Infosys and Temasek's JV -- Infosys Compaz has collaborated with Singapore-based communications, entertainment and digital services provider StarHub.
• Adani Ports and Special Economic Zone has handled cargo volume of 25.1 MMT in December, 2022, registering a growth of 8% Y-o-Y.