Sensex drops on Q3 fears

MARKET WATCH

Key indices ended around 1.5 per cent lower, for the third consecutive session, as investors booked profits on fears that the third quarter corporate earnings may not meet market expectations.

The Oct-Dec earnings will be kicked off by Infosys and HDFC Bank on Thursday. "There are fears in the market that technology results will be bad," a dealer said.

Technology companies are likely to see a slowdown in sequential growth due to almost 3 per cent appreciation in the rupee and fewer billable days last quarter. A rising rupee and wage inflation is likely to hit revenues of technology companies by 4 per cent in the Oct-Dec quarter, reports said.

Brokerage CLSA Asia-Pacific Markets expects technology companies to post 41 per cent year-on-year rise in revenues, while growth in Oct-Dec is seen merely at 7 per cent.

"It is unlikely that Q3 earnings of technology companies will match that of the last quarter," a dealer said. Weak cues from global markets also dampened sentiment on Wednesday, dealers said.

Asian and European markets fell due to decline in energy shares as global crude oil prices continued to hover near an 18-month low for the second day in a row. The Bombay Stock Exchange's 30-share Sensex ended at 13362.16, down 204.17 points or 1.5 per cent from Tuesday. Intraday it moved between 13336.52 and 13519.59.

The National Stock Exchange's 50-share Nifty ended at 3850.30, down 61.10 points or 1.6 per cent. Intraday it moved between 3841.70 and 3911.95.

Turnover on both the exchanges was roughly Rs 13,200 crore, against Rs 14,000 crore on Tuesday. The CNX Midcap ended down 0.9 per cent and S&P CNX 500 fell 1.5 per cent. On BSE, declines outnumbered advances 2:1. Mahanagar Telephone Nigam was up 1 per cent at Rs 156 on value buying as the company has seen a sharp correction in the last few months.

Analysts expect the stock to touch Rs 200 in the near term. Wipro, up 2 per cent at Rs 590, bucked the trend among technology shares.

"There could be some bargain hunting by a foreign fund in the stock," a dealer said.

ITC was up 1 per cent at Rs 163. Brokerage Edelweiss Securities has an "accumulate" rating on the stock on the back of buoyant growth in the hotel business.

Shares ended down across sectors on profit sales. Bank shares were severely beaten on profit sales following the recent run up in the sector, and on worries they may face higher margin pressure in the Oct-Dec quarter.

"There are concerns that the impact of lending rate hikes will be seen only in the next quarter. This quarter margins will be under pressure," a dealer said.

The BSE Bank Index, down 2.5 per cent, was the worst hit among BSE indices. Oriental Bank of Commerce was down 4 per cent at Rs 214 and State Bank of India was down 3 per cent at Rs 1,136.

iGate Global Solutions ended down 3.5 per cent at Rs 394 on profit sales after an initial rise of 4 per cent driven by a jump in third quarter net profit. The company posted a net profit of Rs 16 crore in Oct-Dec, up from Rs 1.30 crore a year ago.

Bharat Heavy Electricals was down 5 per cent at Rs 2,144 due to profit sales. The share was the worst hit on Nifty. The stock had gained 75 per cent last year.

Zee News Ltd and Wire and Wireless (India), the demerged entities of Zee Telefilms, debuted on the BSE and NSE on Wednesday.

Zee News listed at Rs 50 and Wire and Wireless debuted at Rs 100.20 on NSE. Zee Telefilms has been renamed Zee Entertainment Enterprises, effective from on Wednesday.

Film production and distribution company, Shree Ashtavinayak Cine Vision, listed at Rs 189.90 on BSE.