Profit-booking ahead of key company results, budget pull down markets

Mumbai: Profit-booking ahead of key corporate earnings and the budget next week dragged down benchmark indices the most in a month-and-a-half on Friday. Fear gauge India Vix rose to the highest level in over a month.

The Nifty fell 1.09% to 24,530.9 while the Sensex pulled back from the 81,000 mark 0.9% to 80,604.65. Both indices hit fresh record highs – 24,854.8 and 81,587.76-at opening before pulling back and closing marginally off their lows. Broader markets fell twice as much.

Reliance Industries (48.26 points), Tata Steel (16), M&M (15.4), NTPC (14.08), Tata Motors, Bharti Airtel and HDFC Bank were the biggest drags on the Nifty, contributing to half its 269.95 fall.

Also read | Reliance Industries share price rises more than 20% year to date: Morgan Stanley expects more gains of around 13%

“Investors and traders took some money off the table after a one-way rally from 4 June, ahead of Reliance results post market hours Friday, Kotak Mahindra Bank and HDFC Bank on Saturday and the budget on Tuesday,” said Dhiraj Relli, managing director and chief director of HDFC Securities.

While Relli doesn’t expect any negative surprises from the results or the budget for the market, the sharp rally from the day of the elections to date makes it “prudent to take some money off the table.”

Nifty and Sensex have rallied 12% each to Friday’s closing after the Narendra Modi-led NDA won a historic third term in office.

The rally since the date of the election results has been driven by foreign institutional investors, who have net purchased shares worth ₹57,337 crore in the past two months through 18 July after selling shares worth ₹34,257 crore in April-May. 

Midcaps Down

Institutional activity for 19 July was awaited until press time. However, investor selling was more focused on mid and small caps. The Nifty Midcap 150 fell 2.09% to 20812.25 while the Nifty Smallcap 250 fell by 2.36% to 17163.40.

Also read | Reliance Q1 Results: Net profit declines 5.4% yoy to ₹15,138 crore: Revenues improve 12% yoy

Small caps that fell the most included MCX, Mastek, JK Paper, Apar Industries and Chennai Petroleum which fell 6-11%.

Gaurav Dua, SVP- head capital market strategy at Sharekhan by BNP Paribas, expects the large caps to outperform small and microcap stocks due to favourable risk-reward , in the sessions ahead. He is bullish IT enabled services, consumer, pharma and some names within the specialty chemical sectors.

As Reliance and HDFC Bank are index heavyweights, their results could have a bearing on Nifty, which reopens on Monday.