Nifty closes below 5,000 amid volatility; tech, banks drag

The Nifty retreated after seeing consolidation throughout the session and did not continue yesterday's late trade rally. The sell-off in technology, banking, realty, telecom and FMCG stocks along with heavyweight Reliance Industries pushed the Nifty below the 5,000 mark on closing basis, after five sessions of trade. However, metal stocks bucked the trend on the back of rally in base metals on Tuesday.

The market opened on a positive note following good global cues but in the second half, it erased early gains and traded with extreme volatility. Indices slipped further in the last half an hour of trade. Asian markets ended higher; Hang Seng was up 2%. Nikkei, Straits Times and Taiwan Weighted gained 0.9-1.1% while Kospi was flat. European markets and US index futures were marginally positive, at the time of writing this report.

Rise in Indian rupee was the main concern for fall in technology stocks while Infosys numbers on Friday was also another reason. Rupee has seen sharp appreciation in two days, which will impact earnings of IT companies. It was trading at 46.57 per dollar. Wipro, TCS, Infosys and HCL Tech were down 2.5-4.3%. Tech Mahindra was down 1.57%.

Telecom stocks also continued to see selling for third day in a row. Reliance Communication was down 2.31% and Idea Cellular down 1.24%. Bharti Airtel fell 0.29% and Tata Teleservices down 0.15%.

Amit Dalal of Amit Nalin Securities said there were two big forces for the market today. One was the fact that rupee has strengthened so much over the last two days. "Therefore one felt that the FII flows will move the markets up even further. And I do believe that if the rupee remains strong you will see all the FII selling that has taken place or any funds which were on the sidelines comeback again because it is impossible to leave the market when the market's currency starts strengthening.

"But on the other side we have two sectors which have given way to changing fundamentals which may not be completely in their favour; one is telecom and second is technology because of the improving currency. Therefore there has been a shift in portfolio of moving away from these two sectors towards FMCG and Capital Goods. If you see both these have been the star players today."