Sensex drops 189 points to end below 28,000

Benchmark indices ended lower owing to selling among blue-chips even though the government eased the escalating worries about retrospective taxation yesterday. A weak monsoon forecast further dampened the sentiments.

Provisionally, the 30-share Sensex ended down 189 points at 27,701 and the 50-share Nifty shed 39 points to close at 8,391. 

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(updated at 3.30 PM)

Benchmark indices continue to remain weak in the late trades owing to selling among blue-chips as corporate earnings miss street expectations. A weak monsoon forecast further dampened the sentiments.

However, the losses are capped with a strong rally in the metal stocks after Bank of America-Merrill Lynch said the sector's return on equity will double by FY17 end.

At 2.35PM, the 30-share Sensex is down 107 points at 27,783 and the 50-share Nifty has shed 16 points at 8,414. 

The clarification from the Indian government that it would honor tax treaties while making a demand of Minimum Alternate Tax (MAT) at the effective rate of 20 per cent came as a relief for favorable treaty nations. But, dilemma still hangs over funds from other nations whose treaties do not grant an exemption from capital gains.

The first monsoon forecast by the Indian Metrological Department (IMD) has predicted below normal rainfall during the season for the second straight year in 2015 primarily due to the build-up of El Nino conditions in the Pacific Ocean. Disruptions in the normal rainfall is likely to put further pressure on the agriculture sector which is already reeling under the impact of unseasonal rains that have damaged crops in parts of country and may lead to higher food inflation making further rate-cuts by Reserve Bank of India less likely.

KEY STOCKS

On the sectoral front, BSE Capital Goods, Oil & Gas, Auto indices are trading lower up to 0.5%. However, BSE Consumer Durables and Metal indices are trading higher over 1% each.

Metal stocks are trading fiem in today’s trade after Bank of America-Merrill Lynch has said the sector's return on equity will double by FY17 end. The research house reinstated coverage on Indian steel makers, with "buy" ratings on Tata Steel, SAIL, JSW and Jindal Steel and Power.

Tata Steel is the top gainer has gained over 4.5%. Vedanta (earlier known as Sesa Sterlite) has gained over 1.5% and Hindalco is up 0.2%.

Coal India is up 1.6% after Brokerage firm CLSA maintained its 'buy' rating on the stock.

According to media reports, Maruti Suzuki has plans of launching a series of new cars for the Indian market in 2015. Unveiled at the 2015 Geneva Motor Show, the Maruti Suzuki YRA model will be named as 'Fronx' for the Indian market.  The stock is up 1%.

TCS is trading higher by nearly 1% after the company teams up with Solace Systems team to deliver digital Reimagination solutions and services.

Select IT shares remain under pressure for the seventh straight session over concerns about quarterly earnings. Infosys has shed over 0.5% ahead of the quarterly earnings due tomorrow and Wipro is down 1.2%.

According to reports, M&M is planning to invest Rs 2,500 crore in expaniding its existing auto manufacturing facility in Telangana., which will increase its capacity to 1.5 lakh vehicles per year. The stock has slipped over 1.5%.

On the concern of poor monsoons ahead of the June-to-September monsoon season, Auto and FMCG stocks are trading lower. ITC down 0.7% , Tata Motors down 2%, Hero motocorp has shed 1%. 

HDFC Bank is up 0.4% ahead of the quarterly results due later during the day.

Sun Pharma has slipped over 2% on profit taking.

The number of new launches in residential real estate has come down by 55 per cent in the first quarter this year owing to subdued sales, according to a report. From the realty pack, Unitech, IB Realty, Godrej, Anantraj, HDIL and NBCC are down up to 1.5%.

In the broader market, BSE Midcap and Smallcap indices are trading higher by 0.7% and 0.2% each and are outperforming the large counterparts.