The mood on Dalal Street has not improved yet after the key rates hike and hawkish tone set by the RBI governor Duvvuri Subbarao in a policy meeting on May 3. The Sensex shed nearly 259 points on Thursday, with continuing downtrend for eighth consecutive session.Experts see earnings downgrade in the quarter ended June 2011 after the 50 basis points hike in repo and reverse repo rate. Interest cost of the companies will increase going ahead as banks have slowly been increasing their lending rates.
Deven Choksey of KR Choksey Shares & Securities feels that people basically want to sit on cash for a simple reason that there is a kind of possibility of earning downgrade happening going forward once this particular oil price hike is announced.
Inflation is a major cause of concern, says Finance Minister Pranab Mukherjee. "Food and oil prices are major inflation factors," he said. Food articles inflation for the week ended April 23 was at 8.53% as against 8.76% in previous week. Fuel group inflation was unchanged at 13.53% during same period. RBI governor has made the move to contain inflation without hurting country's growth.
Robert Prior-Wandesforde, Credit Suisse says that the Indian economy and markets are facing a particularly unpleasant combination of macroeconomic circumstances right now. "This includes high inflation, rising interest rates and the likelihood of downside growth surprises. This situation may continue for some months making us pessimistic about the equity market outlook," he said.
The 30-share BSE Sensex dropped 258.78 points or 1.40%, to close at 18,210.58 and the 50-share NSE Nifty closed below the 5500 mark for first time since March 23, down 77.30 points or 1.40% to 5,459.85, dragged down by 42 shares out of 50.
Choksey feels that the Nifty could possibly stay in range of 5400-5700 because the option traders are basically taking a strong long bet on the 5400 level.
Amit Dalal, Executive Director, Tata Investment Corporation said there would be some more pressure mainly because people have to still adjust their portfolios worldwide. "So there maybe some largecaps where there maybe selling based on global perspective," he said.
Realty, power, FMCG, healthcare, banking, metal, technology and capital goods stocks saw selling pressure today, with respective indices falling 1-3%.
Bharti Airtel plunged more than 3% after less than expected bottomline reported in fourth quarter on dip in margins. India's largest telecom operator reported net profit of Rs 1,401 crore on consolidated basis as against street expectations of Rs 1,740 crore.
Largecaps like TCS, NTPC, ITC, ICICI Bank, Sterlite, HDFC Bank, HUL and BHEL were down 1-3%. Tata Power, Reliance Power, PNB and Reliance Communications plunged 5-6%.
Ranbaxy Labs was the biggest loser on Nifty, with falling 6%. US Federal prosecutors are negotiating a settlement with Ranbaxy that could result in fines and payments exceeding USD 1 billion, as mentioned in the Fortune Magazine, for fraudulent conduct alleged by the FDA, reports CNBC-TV18 quoting sources.
ACC and Ambuja Cements tumbled about another 4% after Holcim increased stake above 50% in both companies.
However, Hero Honda showed outstanding performance today, with rising 6% on short covering. Analysts feel that company's fourth quarter EBITDA performance was better than street expectations.
The broader indices too were down around 1%. Midcap stocks like HDIL, Shriram City, Redington, Hathway Cable and Marico lost 5-8%.
However, Jyothy Labs, Apollo Hospital, United Phosphorous, Tulip Telecom and Religare Enterprises gained 3.5-7%. Rs 474.75 3.51%
About 899 shares advanced as against 1955 shares declined on Bombay Stock Exchange.
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