The markets opened positive but could not hold their gains at the higher level and slipped into the red. It closed near its lowest point of the day with negative market breadth. Most of Asia ended flat, but China was down over 8%.
The Sensex closed down 74.98 points, or 0.51%, at 14495.77, and the Nifty ended down 30 points, or 0.70%, at 4267.05. About 1,149 shares have advanced, 1,371 shares declined, and 83 shares remained unchanged.
Auto, IT, and capital goods were among the major losers. In the auto sector, Tata Motors slipped as it came out with a disappointing set of monthly May sales. IT stocks continue to reel under pressure as the rupee is seen trading at 40.52 levels against the dollar. Sugar sector was a major underperformer in today's session. Bajaj Hindustan, Balrampur Chini, Renuka were among the major losers.
However, metal index outperformed the markets with gains of over 1.2%. The BSE Metal Index was up 1.6% to close at 10,634.17. Jindal Steel, Hind Zinc, Jindal Saw, Tata Steel were among the gainers. Hindalco surged and ended up over 4% on reports that Sterlite with Alcan is looking to buy stake in the company.
FMCG stocks ITC and Dabur India were also among the top gainers. The BSE Small Cap Index closed at 7,466.77 down 0.01%. The BSE Midcap Index ended at 6,233.58 down 0.5%.
Jagdish Malkani, Member, NSE, said, “The market has been a bit rangebound and boring and considering that the June series has started, it is difficult to say. It is almost as if the market is trying to make up its mind. Those five or six stalwarts of the Sensex/Nifty seem to be resting their ores. No new leaders are emerging and there is only some action in the midcap space. I think it will have that stab, which has been eluding the breaking of the Sensex’s all-time high.”
He feels that a bit of a shakedown is necessary. “I still feel it’s high time there was a bit of a shakedown or breakdown. However, no signs of that either is emerging. I think for some time it is going to be the midcaps that will come out and make some runs. Whichever sectors you play right now, for instance capital goods continues to be strong. The old stars are out of the running for a bit, like IT and hotels etc, because of the rupee appreciation,” Malkani added.
He feels there are still select stories in the midcap space. “There are select stories in the midcap space. This is really cherry picking time as there are a lot of stories there. This is the highest GDP growth quarter in 18 years. These stars of tomorrow need to come out and take their place in the sun. I think some of that is happening but not with enough speed,” Malkani added.
He is bullish on the IT space and feels that investors should take long-term positions in this sector.“The rupee still looks like it will break that 40 barrier, may be even 39 who knows, in which case it is obviously bad news for IT companies. It could also swing the other way. This sector is the most competitive sector and certainly one should be using this time to accumulate and salt these away. When the time comes and Infy is running away at Rs 2500, we’ll be kicking ourselves. I’m sure some of these are opportunities, both in the midcap and largecap sector. I think that it is time to cherry pick,” he added.
Meanwhile, A Balasubramaniam, Chief Investment Officer of Birla Sun Life, would approach the market in an "almost fully invested" manner although the cash component across all of his company's schemes would be in the range of 5-8%.
The broad macro fundamentals of the economy suggests a long-term bull market; so, he doesn't think that it is worthwhile to actually look at the market and then, move from one asset class to another asset class.
The advance tax payment, plus liquidity as well as three to four upcoming IPOs, could have a negative impact on the market. He expects to see "some bit of downward trend as we move forward in the near term".
Otherwise, post the 9% plus GDP numbers as well as the expected earnings growth for this year, which is assumed at about 15% for the BSE Sensex listed companies, he assumes some of the corporates in India to outperform the expected earnings growth for this year, which would once again trigger some kind of participation in the market.
Monday, June 4, 2007
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