The markets gave up all the gains and ended in the red due to selling in IT shares ahead of Infosys results. The Nifty closed at 4,974, down 5 points and Sensex ended at 16,537, down 21 points.
The Nifty opened on an upbeat note and scaled to a high of 5,045 in the morning session. However, the index was unable to cross the 5,050 resistance and succumbed to profit booking following weak opening in Europe. Investors also turned cautious ahead of the IT bellwether-Infosys’ results tomorrow.
Markets in Asia rallied after Chinese state run investment bank bought shares in four big banks to help stabilise China's Banking system. The Hang Seng index rallied over 2% and the Shanghai Composite ended marginally higher and Japan's benchmark Nikkei average closed up 2%.
European markets were trading weak as investors’ waited for the decision by Slovakia for expansion of the European rescue fund. The CAC and DAX declined almost 0.7% each, while the FTSE was off 0.8%.
Back in India, corporate performance in the second quarter is expected to moderate due to input cost pressures and 12 rate hikes by the RBI since March 2010. “We expect Sensex earnings toslump to a two-year low of 7.5% on the back of weak earnings momentum in metals,” said IDFC Securities in their earnings preview.
Analysts expect markets to consolidate around 5,000 levels before scaling to 5,200 levels around Diwali. Amit Chheda-Head Equity-Inventure Growth and Securities said, “Markets will trade in the range of 4,720 and 5,180 and investors can buy and sell at the edges of the range.”
Infosys earnings will set the tone for the markets tomorrow. Elara Capital in the earnings preview said, “Steady demand and rupee dollar tailwind will ensure a good quarter as HCL Technologies and Infosys are best placed on their hedges. While consensus is building up for 200-300 bps guidance cut for Infosys, we believe the cut is unlikely to be more than 150 bps.” Any subdued demand outlook from European Union for IT companies could result in risks to growth in the coming quarters, added Chheda.
Major losers on the Sensex were Infosys, down over 3% ahead of first quarter results; TCS declined 2.3% and Wipro slipped 2% each. The frontline IT shares dragged the Sensex down by 70 points in the second half of the day.
Other Sensex losers were ICICI Bank, down 1.4%, ONGC slipped 2% and Hindustan Unilever was off 1.8%. Prominent gainers on the Sensex were Sun Pharma, up 4.5% and Tata Motors gained 3.6% and NTPC advanced 3.5%.
