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Indian markets ended with gains for the first time in six trading sessions as investors rushed to buy beaten-down shares, shrugging off a weak monsoon forecast for the year. The benchmark BSE Sensex rebounded about 500 points from its day’s low to end at 27,890.13, up 214 points, or 0.8 per cent, from the previous close. The NSE Nifty closed at 8,429.70, up 51.95 points, or 0.6 per cent. Both indices were trading a per cent lower on the back of India Meteorological Department’s (IMD) forecast that the monsoon will be 93 per cent below normal.
The index, however, posted a sharp recovery as value buying emerged in stocks such as Hindustan Unilever, Larsen & Toubro and Axis Bank. The rebound also coincided with the government’s efforts to assuage concerns on retrospective taxation on foreign investors. The government’s decision to move the goods and service tax (GST) bill in the current session of Parliament also helped improve sentiment.
Foreign institutional investors (FIIs), however, continued their selling spree amid uncertainty related to the application of Minimum Alternate Tax (MAT). According to provisional data, FIIs’ sold shares worth Rs 900 crore on Wednesday. Barring the inflows seen on Tuesday on account of the Sun Pharma share sale, foreign investors have been net sellers in all of the past six trading sessions, which have seen the market fall nearly five per cent. FIIs have pulled out nearly $1 billion from the debt and equity markets in the past week.
Nirmal Jain, chairman of IIFL, said the MAT issue was weighing on the market. “Investors are worried because the tax notices might lead to litigation, which might be long-drawn and lead to a lot of uncertainty. The issue is not whether it is legitimate or not; investors are worried because of the uncertainty,” he said.
The government has made a tax demand of Rs 40,000 crore on foreign investors.
Despite the benchmark indices ending with gains, the market breadth remained weak on Wednesday as there were more stocks declining than advancing.
Among blue-chips, Hindustan Unilever gained the most at 3.6 per cent, followed by Hero MotoCorp which rose 3.4 per cent. The shares of Wipro ended six per cent down as its results failed to enthuse investors. Oil and Natural Gas Corporation (-2.6 per cent) and State Bank of India (-1.7 per cent) were the other losing stocks.
Market experts said, the direction could be guided by earnings results.
“Potential downgrades in earnings and overall negative sentiment from global and domestic developments could result in a sharp correction in several expensive stocks… We are worried about the market changing its views on such stocks on possible concerns about their stiff valuations and earnings disappointments,” said Sanjeev Prasad, senior executive director and co-head at Kotak Institutional Equities Research, in a recent note.
