Sensex closes 115 points lower hit by profit booking

Mumbai - India's benchmark Bombay Stock Exchange (BSE) Sensex tanked for the second day in a row, slipping 0.74 percent or 115.45 points on Tuesday as a retreat by European peers hit investor confidence and sparked profit-taking on a recent rally. The 30-share prime index opened higher at 15,691.27 and surge to the day's high of 15,923.09 during noon trade before being hit by a heavy bout of profit taking, which saw the benchmark plunge to the day's low of 15,475.28 before it finally settled at 15,551.19. Twenty-three components logged losses on Tuesday with cement maker ACC leading the pack with a plunge of 3.62 percent. Rival Grasim industries sank 1.37 percent. Aluminium producers Sterlite Industries and Hindalco industries tumbled 2.88 percent and 1.94 percent respectively. Financial majors HDFC, HDFC Bank and ICICI Bank slipped 2.49 percent, 1.59 percent and 0.64 percent respectively. Oil & Gas majors ONGC and Reliance Industries declined 1.98 percent and 1.10 percent respectively. Other major losers were BHEL (down 2.31 percent), Jaiprakash Associates (down 2.25 percent) and Reliance Infrastructure (down 1.93 percent). However, bucking the trend, auto majors Maruti Suzuki, Tata Motors and Hero Honda Motor surged 7.61 percent, 5.82 percent and 1.55 percent respectively on the back of strong sales in August and expectations of robust domestic demand during the upcoming Hindu festival season that starts later this month. Technology outsourcers Wipro and Infosys Technologies climbed 1.50 percent and 0.49 percent respectively on news that their clients have increased their discretionary spending. Other gainers were telecom major Reliance Communications (up 1.34 percent) and FMCG major Hindustan Unilever (up 0.71 percent). The second-rung stocks fared worse than the benchmarks as the BSE Midcap and Smallcap indexes plunged 1.45 percent and 1.51 percent to close down at 5797.49 and 6891.17 respectively. Among the sectoral indices, the worst performers were Realty (down 3.07 percent), Metal (down 1.94 percent) and Power (down 1.66 percent) while the best performers were Auto (up 2.45 percent) IT (up 0.42 percent) and TECk (up 0.06 percent). The overall market breadth was negative as 1658 losers led 1151 gainers while 62 closed unchanged. Elsewhere, the broader 50-share S&P CNX Nifty of the National Stock Exchange (NSE) slipped 0.79 percent or 36.75 points to close down at 4625.35. According to the market analysts, stocks trading in overpriced zone faced the brunt of the profit rally, even as the benchmark mirrored a slide in European markets triggered by renewed fears over economic growth. "Most of the fundamental factors, like improved GDP, are already factored into the market," said T.S. Harihar, vice president at ICICI Securities. "In the short term, at least till the next quarterly results that are a month and a half away, the market will continue to trend according to overseas markets," he said. Agrees Arun Kejriwal, a strategist at research firm KRIS. "India is looking to other markets for support. There are no real domestic triggers to move the market," Kejriwal said. "Foreign funds seem to have sold in the markets today, with data on exports also hurting sentiment," said Ranjit Kapadia, vice president for institutional research at HDFC Securities. Government data released earlier Tuesday showed that India's exports fell for the 10th straight month in July. Merchandise exports slipped 28.4% from a year earlier in July to $13.62 billion. Lackluster debut by energy firm NHPC and negative recommendation against Sterlite Industries by a US federal judge also dampened investor confidence, analysts said. On Tuesday, state-run hydropower generator NHPC Ltd rose 1.9 percent to Rs.36.70 on its trading debut, trailing market expectations after the company's $1.25 billion IPO was heavily oversubscribed. Elsewhere, a US federal judge recommended Mexican miner Grupo Mexico's bid to take control of US copper miner Asarco LLC. Sterlite had made a bid for the miner as it emerges from bankruptcy but Judge Richard Schmidt of the US Bankruptcy Court in Corpus Christi, Texas, said Grupo Mexico's was the better of two plans, as it was more likely to pay Asarco's creditors in full. The analysts also said that despite the economy growing 6.1 percent in the June quarter from a year earlier and meeting forecasts as government stimulus helped spur demand, the poor monsoon threatens to erode growth later in the year even as it drives prices higher. Drought has affected 278 districts, increasing its spread despite higher rainfall in the past two weeks and making the rising prices of sugar and lentils the big worry for the country, the government said, adding that wholesale price inflation could end the fiscal year above the central bank's forecast of 5 percent. Looking ahead, the analysts said the market would remain rangebound with a positive bias. "In the near term, we expect the market to remain rangebound. The reason for that is while on one side liquidity remains benign and there is lot of global appetite to invest in Indian equity, on the other hand, we are seeing lot of supply of paper coming into the market which is eating up a large chunk of FII money that is coming into the market," said Manish Kumar, head (investments), ICICI Prudential Life. "Apart from that, there is no big trigger in the short term barring quarterly results that are going to coming out in the month of October. Also, we are seeing reaction in regional markets particularly China while our market is holding for some while. Therefore, because of these factors we feel our market will be range bound," Kumar said. "May be we are going to see 5 percent movement either side from here onwards. The big movement is going to come post quarterly results. In the medium term, our call is that market is going to head northwards," he added. However, Alex Mathews, research head of Geojit BNP Paribas Financial Services, is less optimistic. "16,000 will be a major resistance for Sensex. As of now it seems to be very difficult to cross 16,000 partly due to weak world markets and due to poor monsoon related issues," Mathews said. "I would remain cautious, although optimistic, in the longer term on various macro economic indicators," said Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services, adding that he does not see markets hitting new highs this year.