Sensex falls for second day after record; Tata Motors drag

The market fell the second consecutive session on Wednesday after hitting record highs on Monday. Weakness in global peers on Fed tapering fears, likely contraction in October industrial output data and warning of downgrade by S&P caused selling pressure today. However, the market shrugged off narrowing in November trade deficit data.

After a lot of struggle, the Nifty managed to close above the 6,300-mark amid pressure. It was down 24.95 points to 6,307.90 while the Sensex lost 83.85 points to close at 21,171.41.

However, the broader markets outperformed benchmarks with the BSE Midcap and Smallcap indices closing flat.

Experts believe investors will remain cautious ahead of RBI monetary policy and Federal Reserve meeting next week. They continue to expect rangebound movement with a negative bias till these events take place.

"We are not likely to move higher from here in a hurry," Sangeeta Purushottam, founder and managing partner of Cogito Advisors said.

According to her, the market will consolidate, but the elections outcome has provided a higher floor to the market. She does not expect it to fall dramatically, but trade in a range.

Rating agency Standard & Poor's said India's sovereign rating may come under pressure if general elections due by May next year end up with a hung parliament or with a government unable to push through reforms, reports Reuters.

Economic data
India's trade deficit narrowed to USD 9.22 billion in November versus USD 10.56 billion a month ago and USD 17.2 billion last year on the back of falling imports.

Industrial output data, which will be announced on Thursday evening, is expected to weak for October. According to a CNBC-TV18 poll, index of industrial production may see a contraction of 1.2 percent as against growth of 2 percent in September, driven by weak mining and electricity, along with a lower manufacturing growth due to high base effect.

Stocks in action
Telecom, capital goods, oil & gas, pharma and Tata pack saw selling pressure today while FMCG and HDFC twins capped the fall.

Tata Motors plunged 3 percent to Rs 377.80 apiece after its subsidiary Jaguar Land Rover increased capex guidance for FY15 that will put pressure on debt and free cash flow of the company.

State Bank of India declined 2.6 percent to Rs 1,796.70, in addition to a 2.6 percent fall in previous session after the government approved its proposal to raise Rs 9,576 crore via qualified institutional placement.

Telecom operators, too, were under pressure with the Bharti Airtel, Reliance Communications and Idea Cellular falling between 2-3 percent.

Shares of Larsen and Toubro, TCS, ONGC, Hero Motocorp, Tata Steel, BHEL and Tata Power lost 1-2 percent.

However, NTPC bounced back, gaining 2.5 percent after Tuesday's 11 percent slide as the management reassured investors that changes will be made in the CERC draft guidelines and impact of other elements barring tax arbitrage is positive for the company.

Shares of state-run coal mining company Coal India rebounded in last hour of trade, rising 1.2 percent as experts believe the penalty of Rs 1,773 crore slapped by Competition Commission of India will have minimal impact on the company's financials.

Among others, HDFC and ITC were up 1 percent each.

In the broader space, Bharti Infratel gained nearly 4 percent as analysts say the deal between Reliance Jio and Bharti Airtel for telecom infrastructure sharing is positive for the company and incumbent wireless operators.

Heineken International moved faster in its bid to control United Breweries that gained 2 percent. Heineken hiked its stake by 1.3 percent via open market purchases, which now holds more stake (38.87 percent) in UB than promoters. UB Holdings surged 7 percent.

Rice stocks like Kohinoor Foods, KRBL and LT Foods rallied 5-10 percent on reports that Qatar Tenders will buy 24,000 tonne rice from India.

Lanco Infratech gained 6.5 percent as sources say lenders approved company's corporate debt restructuring (CDR) package.

10:55am Market Expert
Post the election euphoria, Sangeeta Purushottam, founder and managing partner, Cogito Advisors, expects market movements to be based on stock specific news. She feels the response to the election results were a lot more muted than what she had expected given the historic nature of the results.

"We are not likely to move higher from here in a hurry," she told CNBC-TV18. The market will be very closely watching the US Federal Reserve's move on tapering and the upcoming Reserve Bank policy, followed by results in January.

According to her, the market will consolidate but the election results has provided a higher floor to the market. She does not expect it to fall dramatically but trade in a range.

10:45am Bharti Infratel spikes 3%
Kotak Securities says the agreement between Bharti Airtel and Reliance Jio for telecom infrastructure sharing immediately opens up incremental tenancy potential for Bharti infratel as Reliance Jio rolls out its nationwide 4G network over the coming years.

The brokerage house expects the potential in the next 2-3 years to be around 25,000-30,000 incremental tenancies. "These tenancies, at the current average rental could mean an incremental annual revenue and EBITDA potential of Rs 1,100-1,300 crore and Rs 800-900 crore, respectively.

Kotak reiterates add rating on the stock and raised target price to Rs 200 apiece.

10:35pm Movers and Shakers
Shares of Tata Motors plunged 2.5 percent. Credit Suisse has an outperform rating on the stock and set a target price at Rs 440 apiece.

"Jaguar Land Rover, UK subsidiary of Tata Motors, is guiding for elevated spends in FY15 and capital spends will be met through internal cash flow," Credit Suisse report said.

However, in the report, Nomura says Management expects free cash flow to be negative in FY15.

ICICI Bank , L&T, ONGC , State Bank of India , TCS and BHEL are down between 1-2 percent while NTPC rallied nearly 3 percent. ITC , Maruti and Jindal Steel are other gainers.

10:25am Nomura overweight on IT services
According to a research report, Nomura expects better demand conditions for Indian IT services in FY15F, on: 1) better growth in the US, driven by improved discretionary spending and more growth-oriented budgeting, as an improved macro starts to get reflected in demand; 2) continued strength in Europe driven by cost-efficiency drives and increasing offshore penetration; and 3) sustained traction in cost-efficiency services (IMS/BPO), with possible upside from structural benefits of a depreciated INR.

Nomura is overweight on IT services. Its top buys remain HCL Technologies , where it sees greater potential for growth upsides and reasonable valuations. The brokerage house switches preference to TCS over Infosys on its stronger fundamentals and its 12 percent underperformance to Infosys over the past three months.

10:15am Power Grid sets FPO price
The government has fixed the issue price for the sale of Power Grid Corporation of India shares at Rs 90 apiece, the upper end of the band, which would fetch about Rs 7,000 crore.

The follow-on public offer (FPO) of the state-run transmission utility last week saw bids for 530 crore shares, or 6.74 times the 78.7 crore shares on offer.

Retail investors and eligible employees will get a discount of Rs 4.50 a share on the issue price, Power Grid said in a filing to the BSE.

10:00am Equity benchmarks fell around 0.5 percent in morning trade today weighed down by banks, oil and gas, technology, capital goods and auto stocks.

The Sensex dipped 103.39 points to 211,51.87, and the Nifty slipped 33.40 points to 6,299.45. About 493 shares have advanced, 704 shares declined, and 68 shares are unchanged on the BSE.

The current phobia over impending Fed taper is not a big fundamental worry for India; instead a depreciating rupee may be a trend, asserts UBS.

Speaking to CNBC-TV18, Gautam Chhaochharia, Head of India Research, at UBS says directionally the mood will be positive next year, but the upside can be capped in the near term.

"A good monsoon is a green shoot but its overall macro impact may be limited," Chhaochharia wrote in a recent note on India Market Strategy. He says Nifty can test 6,900 next year.

09:55am NTPC rebounds
NTPC reassured that changes will be made in the CERC draft guidelines and impact of other elements barring tax arbitrage is positive for the company.

"No need to panic as this is a draft for consultation. We will take up concerns over heat rate with CERC and are confident CERC will not mandate switch to plant load factor (PLF) incentives," NTPC said.

Central Electricity Regulatory Commission (CERC) on Monday released draft regulations for power generation companies. Among key highlights of the draft is a proposal to remove a tax arbitrage for power generator NTPC. The stock gained nearly 3 percent today after falling 11 percent in earlier session.

09:50am FII view
For the year 2014, Adrian Mowat of JP Morgan upgraded India to overweight. The style bias is value, he adds.

"As confidence in growth builds, the large premiums in staples and growth stocks that developed in 2013 should reverse. We increase our underweight rating on staples and remain overweight on IT," Adrian Mowat says.

09:40am Bharti Airtel in focus
Reliance Jio, a subsidiary of Reliance Industries and top telecom operator Bharti Airtel have decided to expand their existing pact.

Reliance Jio will pay Bharti for using its towers and fibre optic cables. The pact may be extended to 2G, 3G and other services.

Bharti says Reliance Jio tie-up will be extended to roaming services in future. "We may jointly lay optic fibre and other infrastructure with Reliance Jio. Reliance Jio pact is aimed at avoiding infrastructure duplication," Bharti adds. The stock climbed 0.75 percent.

09:30am Nifty breaks 6300
The market extended losses with the Sensex falling 132.03 points to 21,123.23, and the Nifty losing 39.70 points to fall below the 6,300 level at 6,293.15.

Declining shares outnumbered advancing ones by a ratio of 639 to 410 on the BSE.

Shares of Tata Motors , BHEL and Larsen and Toubro plunged 2 percent each. Top lenders State Bank of India , ICICI Bank and HDFC Bank declined 1 percent each.

Coal India lost 2 percent as the Competition Commission of India has slapped a penalty of Rs 1,773 crore on the company for abusing its dominant position.

09:15am The market fell further in early trade on Wednesday following weakness in global equities as investors are cautious ahead of Fed meeting and RBI policy next week.

The Sensex slipped 101.18 points to 21,154.08, and the Nifty declined 29.50 points to 6,303.35.

Larsen and Toubro, Tata Motors, ICICI Bank, TCS , Infosys , HDFC Bank, Reliance Industries , State Bank of India, ONGC and BHEL are losers in the Sensex.

However, the gainers are ITC , Hindustan Unilever , NTPC, Bharti Airtel, HDFC and Cipla .

Indian rupee declined in early trade on Wednesday. It opened lower by 17 paise at 61.22 per dollar as against previous day's closing value of 61.05.

According to NS Venkatesh of IDBI Bank , the rupee will take cues from movement in equity markets. "Global equities are showing a downward trend. US budget deals are coming to an understanding which is a positive cue," he adds.

Venkatesh expects the currency to move in a range of 60.80-61.20/USD.

The dollar is near a six-week low against major currencies holding around the 80 mark. Euro strengthened on expectations of a banking deal in the euro zone.

Asian markets are weak following negative cues from Wall Street. Shanghai and Hang Seng lost over 1 percent.

US markets ended modestly lower on tuesday, with S&P 500 retreating from a record close ahead of the Fed meet next week. European equities, too, trended lower.

In commodities, gold prices are near three-week high boosted by a weak dollar. Crude prices inched up this morning with Brent getting closer to USD 110 per barrel and Nymex topping USD 101 per barrel after data showed a larger-than-expected drop in crude inventories.