Profit selling sees indices end in negative terrain

Equities settled at the day’s low on Thursday as traders booked profits after indices scaled new highs early in the session. Investors were bullish at start expecting major inflows from foreign markets following the 25 bps Fed rate cut late Wednesday, even though it was in line with Street expectations.

“Three major events--RBI’s credit policy, second quarter earnings, and the Fed--are done with. With no triggers in the near term to pull up the market, traders began booking profits,” said DD Sharma, senior vice president at AnandRathi Securities.

“The Sensex is finding it difficult to sustain above 20,000 on a closing basis. It seems to have formed an intermediate top at 20,100, and there are more possibilities of downside from here,” he added.

The Bombay Stock Exchange’s Sensex ended 114 points or 0.57 per cent lower at 19,724.35. The index swung from a high of 20,204.21 to a low of 19,634.47 intraday.

National Stock Exchange’s Nifty closed down 34 points or 0.58 per cent at 5866.45. After making an all time high of 6011.95, the index fell to a low of 5837.2 before the close.

Solid gains in ONGC (up 6.6%), Larsen & Toubro (4.29%), ICICI Bank (3.33%), Reliance Communications (2.42%) and Ranbaxy Laboratories (2.06%) cushioned the benchmarks from a steeper fall.

Tracking overseas indices, shares opened sharply higher but were unable to sustain the gains. FMCG, telecom and real estate proved to be the biggest drags. Stocks from the Reliance stable, main index drivers over the past two months, also ended weak.

Among the frontliners, Maruti Suzuki (down 6.51%), Hindustan Unilever (6.43%), Bharti Airtel (6.32%), Reliance Energy (5.3%), Hindalco Industries (4.28%) and Reliance Industries (3.99%) were the biggest losers.

“Market has been waiting for a correction for some time now. It has run up purely on strong FII flows and supported by news triggers. Huge foreign investment will be required for the Sensex to sustain above 20,000,” Sharma said.

Foreign funds net bought equity worth Rs 17,650.6 crore in October (till 26th), according to SEBI data. In September, they had net bought Rs 18,948.6 crore of stocks.

“The correction could continue Friday, but it is too soon to say how deep the cut would be. I advise traders not to enlarge positions now and to avoid buying high-momentum stocks but get into strong valuation stocks,” he added.