The markets opened marginally higher, but slipped into the negative in the morning session following subdued global cues and profit booking in realty shares. The S&P CNX Nifty touched a high of 5,658 in opening trades and was trading down 10 points, at 5,640 and the Sensex declined 23 points, at 18,783.
Markets across Asia were also weak due to thin volumes as US markets remained closed for Independence day. Japan's Nikkei Stock Average slipped 0.2%, China's Shanghai Composite was off 0.3% and Hong Kong's Hang Seng was trading flat at 22,761. Selling pressure in energy and banking shares capped gains.
Back in India analysts expect profit booking in the coming days as there are expectations that the first quarter results may be weaker than the fourth quarter, and margin erosion may be seen across the board.
The Foreign Institutional Investors have invested Rs 7,761 crore in a span of six sessions which has spurred the rally from 5,250 to 5,600 levels. Arun Kejriwal, founder, Kejriwal Research and Investment said, “This up move is not sustainable and we expect markets to give up most of the gains in the next 10-15 days. I recommend investors to buy when the markets correct.”
On the technical charts, Nifty has strong support around 5,600 levels and resistance around 5,700 levels. Ashish Chaturmohta from IIFL Wealth said, “If Nifty sustains above 5,700 levels on closing basis, it can scale to 5,760-the 200 Day Simple Moving Average.”
Markets may also take cues from the cabinet re-shuffle expected before August 1. A reformist and a more pro-active cabinet can restore confidence among investors.
Foreign Direct investment doubled to $4.66 billion in May against $2.21 billion last year. Analysts expect this number to grow as BP Plc and Reliance Industries and Vedanta and Cairn India deal goes through which will improve India's current account deficit.
Realty shares were leading the losses in the morning session; the index was down 1.2%. Anant Raj Industries declined 2.5%, DLF was off 2.1% and Sobha Developers fell 2%.
Auto markets which were battered very badly last week due to poor June sales number were leading the gains this morning. Ashok Leyland rallied 3.9%, Mahindra & Mahindra added 1.2% and Tata Motors surged 0.6%.
The midcap and the smallcap indices were trading flat, down 0.1% each.
Top gainers on the Sensex were Mahindra & Mahindra, up 1.2%, Bajaj Auto advanced 0.8% and Cipla gained 0.6%. The top losers were DLF, down 2.1%, BHEL dipped 2% and Reliance Infra was off 1.7%.
Market breadth was negative, 797 stocks declined for 864 stocks which advanced.