Nifty snaps 7-day winning streak on profit booking

The benchmark Nifty snapped a seven-day winning streak on Thursday owing to profit booking in metal, technology, telecom, oil & gas and power companies' shares. However, financial, realty and select auto companies' shares along with L&T were on buyers' radar despite hike in key rates by the RBI, giving indication that the indices had already discounted the rate hike.

The index touched a 32-month high of 5,901.65 in an intraday trade but sell-off or profit booking in heavyweights wiped out nearly 73 points gains in last couple of hours. Heavyweight Reliance Industries, however, managed to hold Rs 1000 mark.

Nilesh Shah, MD and CEO of Envision Capital advised caution at current levels. "Because from all perspectives whether we take a fundamental perspective based on valuations or take a technical perspective, everything suggests that we are clearly overheated in the short term," he said.

He said the markets could take some kind of a pause or a breather but the way the liquidity is flowing in, it sees no sign of cooling off. "We are still kind of clogging at a rate of about more than Rs 2,000 crore a day of fresh inflows from the foreign institutional investors (FIIs). Keeping that in mind, the liquidity can still kind of keep gushing in and if that were to happen then we could basically see a lot more overheating happening in the markets." FIIs invested more than Rs 10,500 crore in the month of September, including Wednesday's provisional data.

The markets completely shrugged off the hike in key rates by central bank - Reserve Bank of India (RBI) on Thursday, after looking at buying in rate sensitives. RBI has increased repo rate (at which banks borrow from RBI for short term) by 25 bps to 6% and reverse repo rate (at which RBI borrows money from banks) by 50 bps to 5% to contain rising inflation.

It's a step in the right direction, government officials including Finance Minister Pranab Mukherjee and chief economic advisor Kaushik Basu said. ''This will help mop-up additional liquidity in the system,'' Mukherjee said. ''RBI's move is not to dampen growth prospects,'' Basu added.