Sensex sheds 118 pts in volatile trading

Market cap eroded Rs 2 lakh crore in 2 days.

In yet another volatile day's trading, the market lost further ground amid profit-booking across technology, pharmaceuticals, FMCG, banking, capital goods and consumer durable counters and selling by foreign institutional investors. The fall meant a Rs 2-lakh crore market cap erosion in two days.

The Sensex shed 118.5 points to close at 11,237.23 on Thursday on top of the 307 points lost yesterday. The Nifty ended 34.5 points (1.02 per cent) lower to 3,345.5.

The benchmark index opened 11 points higher at 11,367 and immediately moved up to a day's high of 11,380.83 but plunged to a low of 11,008.43 under selling pressure, creating a 373-point intra-day volatility. This is the first weekly loss for the Sensex after seven straight weeks of gains.

For the third consecutive trading session, FIIs were net sellers yesterday to the tune of Rs 734.80 crore, taking the total FII outflow to over Rs 1,560 crore in the cash market. Domestic mutual funds, too, were also net sellers yesterday.

FIIs' net sales in the derivatives and cash markets have been over Rs 8,000 crore in the last five trading days. They have been net sellers in the futures and options segment of the market for five consecutive days. In the cash market, they have turned net sellers for three successive days.

Index and stock futures accounted for Rs 6,622 crore of a total sales of Rs 8,205 crore, while net sales in the cash market aggregated Rs 1,584 crore. FIIs' net sales in the cash segment topped Rs 735 crore yesterday.

Local mutual funds, which turned net sellers with Rs 200 crore of sales on April 10, were net buyers at Rs 71 crore yesterday.

Paras Adenwala, chief investment officer-equity, ING Vysya Mutual Fund, said, "Profit booking was witnessed across the board, including the mid-cap and small-cap stocks. The markets have been perceived as expensive and the FIIs have turned net sellers both in the cash and futures segments. But we still see appetite for buying."

Despite the fall, most of the analysts were bullish over the medium- to long-term on the market movement outlook. The fourth quarter performance of India Inc would hold the key to the market movement next week, they said.

Mitesh Shah, vice-president, PCG Sales, Brics, attributed the volatility to unwinding of margin funding by brokerage firms, FIIs selling and apprehensions about Infosys' performance.

Except for the BSE oil and gas index, which was up 0.63 per cent, all sectoral indices were in the red on Thursday. The recovery staged by some key stocks in the metal and automobiles sectors trimmed the losses in these indices to 0.97 per cent and 0.78 per cent, respectively. The bankex fell 2.3 per cent, and the capital goods index slipped 2.8 per cent.

BSE's IT, teck, health care and FMCG indices were down by a little less than two per cent each, while the PSU index suffered a loss of 1.3 per cent and the consumer durable index lost 1.39 per cent.

In a day of negative market breadth with 639 shares advancing against 1,819 declining, Maruti stole the show, gaining 3.30 per cent to Rs 870 after the company announced that it would merge Maruti Suzuki Automobile India with itself.

Reliance, too, advanced over 2 per cent to Rs 847. Another major gainer, Dr Reddy's Labs, rose by 3.26 per cent to Rs 1,474 after getting the US drug approval.

Large-scale profit booking was seen in the tech scrips before the announcement of the Infosys results. Wipro was down by 0.50 per cent to Rs 515, Infosys by 1.85 per cent to Rs 3,019, Satyam Computer by 3.30 per cent to Rs 772 and i-Flex by 6.50 per cent to Rs 1,318.

Capital goods stocks like ABB, Bharat Electronics, Alstom Projects, KEC Infrastructures, Siemens, Gammon India, HEG, L&T and SKF India were also down on profit booking. FMCG stocks like Nestle, Colgate, Shaw Wallace, Tata Tea, McDowell, Britannia, Nirma and ITC also lost ground.

Among banking stocks, Corporation Bank lost 6 per cent to Rs 341, Canara Bank 4.40 per cent to Rs 244 and PNB 2 per cent to Rs 438.

Select metal stocks, driven by firm metal prices on the LME, hogged the limelight.

Tisco gained by 1.12 per cent to Rs 565, Jindal Stainless 3 per cent to Rs 130 and Hindalco 0.50 per cent to Rs 192. Rahul Rege, senior vice-president, SSKI Securities, said there was a build-up of retail positions in the last few days on the long side and the future margins were likely to go up from Monday.

"India is expensive compared with other emerging markets. As the interest rates rise, FII investments in India can slow down," pointed out IV Subramaniam, senior fund manager, Quantum Mutual Fund.