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The market posted its biggest decline in nearly three weeks on Thursday after shares of metal and cement companies fell, with the government increasing freight costs in the Railway Budget. Trimming of positions by traders on monthly expiry of derivative contracts also contributed to the market fall. Market players said caution prevailed among investors ahead of the Union Budget, which will be keenly watched by investors for policy direction by the Narendra Modi-led government.
The benchmark Sensex closed at 28746.65, down 261.34 points, or 0.90 per cent, most since February 6. The broad-based Nifty closed 0.95 per cent, or 83.4 points lower at 8,683.85. Only one of six stocks on the Nifty ended with gains.
Information technology shares, led by Infosys, were the biggest-contributor to the Sensex fall. Shares of Infosys ended 2.5 per cent lower at Rs 2,259.5, after the rupee appreciated to three-week high against the dollar.
“Higher profit booking was witnessed, as investors cautiously rolled over their positions ahead of the economic survey and Union Budget,” said Alex Mathews, head research, Geojit BNP Paribas Financial Services.
The Modi government will announce its first full-year Budget on Saturday, when the markets have been kept open for trading.
Brokers said investors were disappointed that the Railway Budget lacked big announcements and feared the government might resort to populist measures in the Union Budget after the defeat in the Delhi polls. “Some sections of the market are worried that the government will go for populist measures after the defeat in the Delhi elections,” said G Chokkalingam, managing director, Equinomics Research.
Dipen Shah, head- private client group research, Kotak Securities, said the market was disappointed by the absence of several big announcements relating to the dedicated freight corridors or other capital expenditure. “We expect the focus on the deficit, as well as reforms, to be reflected in the Union Budget, and we will watch out for the same,” he said.
Railways Minister Suresh Prabhu’s decision to increase freight rates on coal, iron ore and steel from April 1 impacted metal and cement stocks. Cement shares, including UltraTech Cement, and railway stocks such as Kalindee Rail Nirman and Titagarh Wagons, ended sharply lower.
According to provisional figures, foreign investors bought shares worth Rs 2,312.15 crore on Thursday. Domestic institutional investors, too, were net buyers to the tune of over Rs 300 crore. Market players said the FII buying number was high on account of nearly Rs 2,000 crore worth of share sale in Bharti Infratel.
The benchmark Sensex is up nearly five per cent so far in 2015 on the back of FII flows worth around $3.5 billion. The 30-share blue chip index now trades at nearly 16.5 times its projected one-year forward earnings compared to its five-year average of around 14 times. Analysts are pinning hopes on a reform-oriented Budget that will help spur economic growth.
