Sensex plummets 142 points

Strong Q2 GDP growth data failed to cheer the market. On a highly volatile day, BSE Sensex crossed the 9000-mark but came off peak to settle at 8788.81, down 142.35 points.

The benchmark index oscillated (265.19 points intra-day) between 9033.99 and 8768.80. The S&P, CNX and Nifty ended the day lower by 46.05 points at 2652.25.

Market analysts attributed Wednesday's decline to continued profit booking, considering that markets are near all-time high levels after the recent sharp rise in stock prices. Coupled with the 63.78 point loss recorded by the Sensex yesterday, the index has shed 206.13 points in the past two sessions.

The downslide came on the back of higher volumes, indicating overall weakness. BSE clocked a turnover of Rs 3,528 crore on Wednesday, higher than Tuesday's Rs 3,341.37 crore.

On Wednesnday's action was in stark contrast to that of yesterday when the markets reflected weakness in Asian markets. Domestic indices ended lower on Wednesday despite most other Asian markets ending in positive territory.

Taiwan's benchmark index, along with Hong King's Hang Seng and Singapore's Straits Times ended the day higher. Japan's Nikkei briefly crossed 15,000 to its highest level in nearly five years, but closed down 0.37 per cent at 14,872.15.

The foreign institutional investors (FIIs) were net buyers to the tune of Rs 158.70 crore yesterday and Rs 253.90 crore on Wednesday, extending their buying streak to 13 sessions. However, domestic mutual funds, on Tuesday, were net sellers to the tune of Rs 33.14 crore.

All the sectoral indices ended the day with losses, while declines outnumbered advances by a margin of 1597 to 917. The market breadth, which was quite strong till early trade, weakened substantially later. In all, 1592 stocks declined as compared to 898 stocks that rose. Only 56 stocks remained unchanged. Losers outpaced gainers by a ratio of 1.77:1.

According to VK Sharma, head of research at Anagram Securities, "Even though the markets have witnessed a correction in the past two sessions, there is no fundamental change in outlook."

The index needs to close above the 9,000 level for buying conviction to return to the markets, said Sharma. An analyst said the index crossing the 9,000 mark has had a psychological impact, prompting many investors to book profits considering that markets are at an all-time high level.

Stock valuations, however, continue to be a concern. Analysts have noted that Indian equity valuations are among the highest among emerging markets. Sensex is currently ruling at a price earning multiple of 17.

Technology stocks were trounced badly. Wipro was the biggest loser. It fell 5 per cent to close at Rs 423; i-Flex followed with a 3 per cent decline to Rs 989 and Satyam Computer dipped 3 per cent to Rs 653.

FMCG stocks lost ground amid profit booking. HLL was down 3 per cent to Rs 182 and ITC went down 2 per cent to Rs 134.

Among auto stocks Tata Motors was down 3 per cent to Rs 555, Bajaj Auto fell 3 per cent to Rs 2005, Mahindra & Mahindra went down 2 per cent to Rs 453 and Hero Honda went down 2 per cent to Rs 831.