Sensex ends flat defensive stocks shine

SENSEX-ENDS-FLAT-DEFENSIVES-SHINE:Sensex ends flat defensive stocks shine

mumbai  July 17, 2012, 17:20 IST

mumbai  07 17, 2012, 17:30 IST

 

The Sensex ended flat, extending its recent weakness as investors sold recent outperformers such as Tata Consultancy and bought defensive stocks such as ITC due to uncertainty about monsoon rainfalls and the prospect of policy reforms.

Pharmaceuticals shares also gained, as investors bet on solid April-June earnings. Dr Reddy's Laboratories will be the first in the sector to post results on Thursday.

The Sensex is down 1.9 percent in July as low rainfalls during the monsoon raise fears about rural consumption, while investors hope for fiscal consolidation or growth-boosting measures after the presidential elections on Thursday.

 

(To read - Lack of monsoon rain may not mean stocks pain, click http://in.reuters.com/article/2012/07/17/market-eye-lack-of-indian-monsoon-rain-m-idINDEE86G06O20120717)

An improvement in sentiment on either front could help stocks recover quickly, analysts said.

"The downside risk for the market from here is limited and we may see an uptick in coming week mainly on back of reasonable performance on the earnings front and on optimism that post presidential election we may see some policy action" said Sunil Jain, head of equity research at brokerage Nirmal Bang.

"Anyhow currently valuations are not so expensive they are attractive at this level," Jain added.

The Sensex rose 0.01 percent to 17,105.30 points, almost matching its lowest close this month hit in the previous session.

The Nifty lost 0.08 percent to end at 5,192.85 points.

Shares in IT services exporter Tata Consultancy Services fell 1.8 percent, marking its second consecutive fall as last week's well-received earnings results are offset by concerns about valuations and global economic headwinds for the sector.

Airline stocks dropped on media reports state-owned oil companies have raised aviation turbine fuel prices by about 1.7 percent to account for higher crude prices.

Jet Airways shares fell 4 percent, while Kingfisher Airlines lost 3 percent.

Exide Industries fell 2.5 percent after Deutsche Bank downgraded the industrial and automotive batteries maker to "hold" from "buy", citing weaker pricing power due to steeper competition and higher selling costs.

Jindal Steel and Power fell 0.8 percent after CLSA downgraded the stock to "underperform" from "outperform" because of concerns about project execution and rising policy risks from its captive coal mines.

However, defensive stocks shone on Tuesday with cigarette maker ITC ending up 1.4 percent to 255.50 rupees, not far off its record high of 260.40 rupees hit on July 2.

Shares in major drug makers, another defensive sector, gained, helped as well by expectations for strong April-June earnings.

A weaker rupee could improve returns from drug exports, and the sector should benefit from exclusive rights to sell some drugs in the key United States market, analysts said.

Dr Reddy's Laboratories rose 1.74 percent, while Sun Pharmaceutical Industries rose 1 percent.