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The BSE Sensex ended with losses in a choppy session on Tuesday, led by declines in domestic-oriented stocks on worries that the remaining January-March quarterly earnings might not meet market expectations, while lower Asian stocks also weighed on sentiment.
January-March 2015 would mark the fourth straight quarter of disappointing results with low signs of on-the-ground revival in the economy since the election of Narendra Modi as Prime Minister in May 2014.
Foreign institutional investors (FIIs) sold shares worth Rs 756.52 crore on Tuesday, provisional data provided by stock exchanges showed. In the past eight trading sessions, FIIs have sold shares worth about $1 billion from the Indian market.
Investment bank Credit Suisse on Tuesday cut Nifty earning estimates for FY16 and FY17 by two and one per cent, respectively, citing January-March quarterly earnings so far. Attractive short-term valuations after a 10 per cent fall from record highs in March, might still lead to tactical bounce, investors said.
"Earnings need to follow up in the long run, but markets can easily bounce five per cent from here as they are oversold and the worries on taxes are well discounted," said G Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.
The BSE Sensex fell 0.2 per cent to end at 27,440.14, while the broader Nifty lost 0.1 per cent to close 8,324.8 after posting its biggest daily gain in about two months in the previous session.
The National Stock Exchange's volatility gauge India VIX's gains on Monday alongside shares were already questioning the rationale of the bounce in the previous session. VIX closed 0.3 per cent higher, adding to Monday's 0.5 per cent rise.
MSCI's broadest index of Asia-Pacific shares outside Japan extended losses on Tuesday on worries that region's growth was faltering in the face of slowing demand from China. A survey released on Monday showed China's factories suffered their fastest drop in activity in a year in April as domestic demand weakened.
Among key domestic stocks, metal and energy companies rallied, while auto and banking stocks fell. Sterlite Industries gained 6.6 per cent, while Tata Steel and Hindalco added nearly five per cent each. ONGC gained 4.4 per cent, adding to Monday's seven per cent rise. Meanwhile, Mahindra & Mahindra fell 2.3 per cent, while HDFC and State Bank of India closed almost two per cent down.
"Consolidation could prevail in the short term. Market will track the fourth quarter earnings and outcome of the Budget session. The fate of the key bills GST (goods and services tax) Bill and Land Bill will influence market sentiments," said Vinod Nair, head of fundamental research at Geojit BNP Paribas Financial.
