Mumbai: Benchmark indices fell for the second successive session on Tuesday, as the market is trying to digest the heady gains of the past few weeks. Brokers said share sales by promoters trying to meet the 25 per cent minimum public shareholding rule, and the US Federal Reserve meeting on Wednesday, made buyers cautious.
The 30-share Sensex fell 112.37 points to close at 20111.61, and the 50-share Nifty ended at 6114.10, down 42.80 points over the previous close. Shares from the realty, auto, power and banking sectors struggled, while those from the IT services sector gained ground.
Indian equities have risen sharply over the last few weeks, in line with other emerging markets, with the widely held theory being that global investors are switching from commodities into equities.
However, fourth quarter earnings and macroeconomic indicators still do not make the case for Indian shares to be able to sustain recent gains. Rating agency S&P has retained its negative outlook on the country, and Thermax boss MS Unnikrishnan on Tuesday said order flows for the capital goods sector had not improved in the March quarter. Revival in the corporate investment cycle holds key to India's economic recovery.
In addition, the offer-for-sale (OFS) issues by companies trying to meet the June deadline on minimum public shareholding, is soaking up a good portion of the available liquidity in the market. "We could see some supply over the next 10-15 days which aggregates close to USD 2 billion. So to that extent, that supply may put some pressure on the market," said Jyotivardhan Jaipuria of Bank of America Merrill Lynch in an interview to CNBC-TV18 earlier in the day.
Shares of Fortis Healthcare, which recently concluded its OFS, and those of Omaxe, which set a floor price for its OFS at a discount to market price, were among the big losers on Tuesday.
Fortis shares fell over 5 per cent and Omaxe, over 7 per cent. Overall mid-caps fared worse than their large cap counterparts, as investors chose to take some cash off the table after the recent rally.
Divi's Lab fell over 7 per cent as fourth quarter numbers fell short of market expectations. Aurobindo Pharma, Karnataka Bank, Bajaj Finance and UltraTech cement were the other big losers, falling between 4-6 per cent.
Investors are eagerly eyeing the US Federal Reserve meet on Wednesday, which could have a bearing on the near term trend in equities. The popular view is that the Fed may start tightening its monetary policy, with the US economy showing signs of strength. This could put further pressure on commodity prices, which have so far benefited from a loose monetary policy, or in other words, very low interest rates.
But should the Fed decided to maintain status quo, there could be pressure on equities, and a rebound in commodity prices, especially gold.
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