Markets succumbed to selling pressure after the sharp rally seen in the past two weeks as investors cashed out of banking shares on concerns that higher oil prices will fuel inflation. IT shares were also weak as Rupee strengthened to five month high.
The Nifty opened in the green and touched a high of 5,944, after which it witnessed profit taking, dragging the index to a low of 5869. The Nifty pared marginal losses and closed at 5,892, down 18 points and the Sensex declined 75 points, at 19,612.
Market experts said that minor correction after a sharp rally was healthy. Gajendra Nagpal, Founder & CEO, Unicon Investment Solutions said, "The markets have rallied 9% in the past ten sessions and it is just taking a breather. Huge amount of foreign inflows have come into the markets, therefore a correction at this juncture was welcomed." Shshank Mehta, Derivatives Strategist, Nirmal Bang said that the Nifty index may take support at 5,865 and 5,800 level.
Foreign Institutional Investors (FIIs) continued to buy shares in India. FIIs have invested Rs 5,595.7 crore in the Indian equities since March 22 to Tuesday.
Broader markets on the Bombay Stock Exchange continued to outperform. BSE mid-cap and small-cap indices gained 0.5% and 0.8% each.
Global markets ended in the green. Hang Seng jumped 135 points to 24,285. Shanghai Comsposite climbed 1.2% to 3,001, shrugging off the hike in key rates by the People's Bank of China.
Oil prices hovered near 2-1/2-year highs stoking inflation and interest rates worries. The Brent crude was trading at $122/bbl on back of supply concerns. Higher oil prices have also raised concerns about rise in oil subsidy bill for the government and its negative impact on India’s fiscal position.
BSE Banking shares were leading the losses; the index was down 0.4% on expectations of further rate hike. Top losers from the banking space were Union Bank, down 2%, Kotak Mahindra Bank dipped 1.1% and Bank of India was off 1%.
IT index was also weak, down 0.7% after the Rupee touched a 5-month high of Rs 44.3 against the Dollar raising concerns that it will adversely affect the operating margins of the Indian IT firms. Wipro shed 2.9%, TCS was down 1.3% and Financial Technologies declined 1%.
Realty shares were on firm ground, the index was up 3.2%. HDIL advanced 8.3%, Phoenix Mills added 7.1% and Sunteck Realty was up 6.6%. Analysts recommend realty shares for long term investment but advise investors to remain cautious in the short term. Nagpal said, "in the near future there will be challenges in the realty space as the stocks are over owned. Every rise in the realty sector will be met with some negative surprises. Investors should be cautious in the short-term and have to pare down return expectations from these stocks. From a long term view, however, these stocks can surge 20-30%."
Among individual stocks NTPC jumped 3.3% and settled at Rs 191, up 1.8% after fourth quarter profit rose 24% to Rs 2,505 crore and net sales increased 17% to Rs 14,488 crore (provisional).
Vedanta Group of companies was also on the buzzer after Sebi approved its open offer to buy stake in Cairn India. The company now awaits the Indian Government's approval. Vedanta subsidiary Sterlite Industries jumped to a high of Rs 182 in morning trades but pared gains soon after, the stocks ended at Rs 177, down 0.8%. Cairn India shed 4.5% at Rs 351.
Market breadth was positive, for 1765 stocks that advanced, 1165 stocks declined.
