BSE Sensex ended flat on Monday in a volatile session, giving up earlier gains of nearly 2 percent due to profit-taking in blue-chips such as IDFC while caution ahead of Narendra Modi’s ministerial appointments also weighed.
Selling pressure was broad-based as mid-cap shares saw steep falls. The NSE Midcap index ended down 2 percent, after earlier surging as much as 2.1 percent to hit a record high at 10,673.75.
Hopes of an economic revival by the incoming Narendra Modi-led government have helped maintain the BSE Sensex as the best performing equity index in Asia for 2014 with 23.4 percent returns compared to Pakistan’s 22.1 percent and Indonesia’s 21.7 percent.
Investors are awaiting the composition of Narendra Modi’s cabinet, allocation of portfolios to the prime minister’s office, and his choice for finance minister, widely expected to be front-runner Arun Jaitley.
“In the short term there would be some consolidation. Expansion of price-to-earnings has happened, now corporate profit growth is on watch,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.
“The outlook is improving with Modi being there. I hope all important ministerial positions remain with the Bharatiya Janata Party,” Srivastava added.
The benchmark BSE index ended up 0.1 percent, or 23.53 points, at 24,716.88, after earlier rising as much as 1.95 percent.
The broader NSE index lost 0.1 percent, or 8.05 points, to end at 7,359.05, after rising as much as 1.9 percent during the day.
Among blue-chips, IDFC fell 4.7 percent while Tata Power Co ended 4.2 percent lower.
DLF fell 5.9 percent while Bharat Heavy Electricals lost 4.8 percent.
State Bank of India fell 1.9 percent as investors pared positions after Friday’s 9.6 percent jump.
Heavy outperformance since mid-March and investors’ inclination for reducing perceived volatility in portfolios is leading to paring of positions in mid-cap stocks, dealers said.
Ramco Cements Ltd slumped 6.5 percent, Oriental Bank of Commerce declined 5.8 percent, while Jain Irrigation Systems lost 4.9 percent.
Divi’s Laboratories Ltd slumped 4.1 percent, recording its biggest single-day fall since Sept 3, 2013, after the company’s Jan-March net profit rose 6 percent to 1.9 billion rupees, lagging some analysts estimates.
However, among stocks that gained, Sun Pharmaceutical Industries Ltd rose 1.2 percent and Ranbaxy Laboratories Ltd ended up 0.4 percent after an Indian court lifted a temporary stay it imposed on the on completion of the companies’ $3.2 billion merger.
Sanjay Sachdev, Chairman, ZyFin Capital: The current market valuations are at 14x to 15x forward earnings vs. the LTA of 15.8x. Depending on the reform trajectory and macro recovery, we believe markets could sustain the positive momentum in long run. Sectors we believe have a positive outlook are Education, Infrastructure, E&C, Power and Housing Finance. With most expecting India’s GDP to grow at 5.5% in FY15e and 6.5% in FY16e, we are of the view that most macro parameters will show improvement over the next 12-24 months, which will eventually lead to policy rate cuts, which again will re-rate equities. The biggest advantage to corporate India will be faster decisions based actions by the new Government, leading to an economic recovery which in turn has already enthused investors. We are in effect moving into a new realm where the long term average of the markets will get redefined. This is because markets are a function not just of earnings but a combination of sustainable earnings along with positive sentiment and confidence. Though earnings may take time to reach the pre-2008 levels, the medium term traction will continue with the strong push by the government to reform and remove some of the impediments the economy has faced recently.