Markets feel weight of TCS stake sale; Sensex YTD returns turn negative

The benchmark indices fell more than 1 per cent on Tuesday, weighed down by losses in information technology (IT) stocks, led by bellwether Tata Consultancy Services (TCS). Nervousness ahead of the two-day policy meeting of the US Federal Reserve also weighed on sentiment.

The Sensex fell 736 points, or 1.01 per cent, to close at 72,012. The Nifty50, meanwhile, finished at 21,817, after declining 238 points or 1.1 per cent. This was the lowest close for the Nifty50 and the Sensex since February 13 and February 14, respectively. Following the latest decline, the Sensex year-to-date returns turned negative. The broader market slightly underperformed with the Nifty Midcap 100 and the Nifty Smallcap 100 indices dropping 1.24 per cent and 1.2 per cent, respectively.
 

Total market capitalisation of BSE-listed companies dropped by Rs 4.8 trillion to Rs 374 trillion.

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IT stocks contributed to most of the declines. TCS dropped more than 4 per cent and was the biggest drag for both Sensex and Nifty50. The IT major fell after promoter Tata Sons sold shares worth over Rs 9,300 crore to pare its debt. Shares of TCS fell 4.04 per cent to close at Rs 3,978 on the BSE, where Rs 10,311 crore worth of shares got traded.
 

The monetary policy announcement of the US Federal Reserve on Wednesday also kept investors guessing. The US central bank is expected to keep the rates unchanged after the latest meeting. But some fear that the recent hotter-than-expected inflation data in the US may prompt the Fed to keep rates higher for longer. Market players said the US economic outlook impacts the IT stocks the most. The Nifty IT index fell nearly 3 per cent. Other IT majors HCL Tech, Wipro and Mphasis fell over 3 per cent each.

“Last week we had a big stake sale in ITC and this week TCS. Such large deals are taking liquidity out of the market. But simultaneously we had the narrative change from three interest rate cuts in the US this year to two. Also, the Fed might be a bit hawkish given the recent macro data. Oil and other commodity prices have not been rising and that has not helped some of the companies,” said Andrew Holland, CEO of Avendus Capital Alternate Strategies.

Meanwhile, the Bank of Japan announced its first rate hike in 17 years, bringing an end to perhaps the last negative interest policy regime. “The Bank of Japan’s rate hike was widely expected, but it also gave a dovish commentary,” said Holland.

Corporate earnings announcements from the next month and election-related news flow will determine the market trajectory in the near term, said analysts.

“We expect the market to remain in consolidation mode as cautiousness persists with the commencement of the US Fed meeting. While the US Fed is likely to maintain its stance, its commentary will hold importance as it would provide insights into the central bank’s future rate action,” said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services.

The market breadth was weak with 2,633 stocks declining and 1,188 advancing. Foreign portfolio investors (FPI) were net buyers to the tune of Rs 1,421 crore and domestic institutions bought shares worth Rs 7,450 crore. 

The institutional buying figures were skewed due to the TCS block deal, said market players.

The total market capitalisation of BSE-listed companies dropped by Rs 4.8 trillion to Rs 374 trillion