Sensex sheds 126; ITC dips 3.5% as traders flee defensives

Shares tumbled Thursday, led by bruising declines in FMCG, banking and capital goods shares. With the October IIP data casting fresh doubts on the pace of economic recovery, and the political gridlock in the Parliament continuing, the mood has turned cautious for the time being, brokers said.

The 30-share Sensex shed 126 points to close at 19229.26, and the 50-share Nifty fell 36.50 points to close at 5851.50. Sellers targeted small and midcap shares that had risen sharply over the last couple of weeks. Market breadth on the NSE was markedly negative with more than two shares retreating for every one that rose.

Brokers say the near term outlook on the market remains bullish, but shares will have to digest the huge gains made in a short time. Most analysts say leading stocks are not cheap at current valuations as earnings growth will most likely remain sedate for some time.

ITC slumped after FTSE lowered its free float weighting for the cigarette maker in its global equity index series, according to the web site of the index provider. The changes, which are effecting as of the close of trade on December 21, would impact passive trackers of FTSE indexes. Citigroup said in a note the change in free float weighting could lead to selling of 36 million shares in ITC, amounting to USD 200 million.

FTSE also increased Kotak Mahindra Bank's free float weighting to 35 percent from 33 percent and IndusInd Bank's to 49 percent from 24 percent.

ITC shares closed down 3.5 percent, but IndusInd Bank gained 0.8 percent. Kotak Mahindra ended trade down 1.11 percent.

Shares in Hindustan Unilever fell nearly 2 percent, down for the second day, on concerns that it may face higher royalty payments to its parent Unilever PLC. Concerns came after Unilever Indonesia agreed on Wednesday to pay a higher royalty payment to the parent company.

Among the winners, shares of Tata Motors rose nearly 4 percent as the British Jaguar Land Rover unit shrugged off the slowdown in key markets to report strong growth. Sales at JLR, which accounts for a majority of Tata Motors' profits, last month increased 14 percent year-on-year to 29,893 vehicles, helped by continued demand for the Evoque SUV.

Shares of Jet Airways continued to fly high, second day in a row, closing up today 7.29 percent after Emirates Airlines said that it has renewed and expanded its partnership with the former.

Sensex loses 100 pts on profit booking; ACC dips 2%

Indian equity benchmarks extended losses in afternoon trade on account of profit booking, weighed down by metals, FMCG, technology, healthcare, capital goods and HDFC pack.

The 30-share BSE Sensex fell 105 points to 19,250.48 while the 50-share NSE Nifty declined 33 points to 5,855.15 after consolidation since it crossed the 5900 level.

Experts feel the market has to consolidate to reflect the gains made by substantial movement posted by a few stocks.

According to Sanjay Dutt, director of Quantum Securities, it is a very positive sign that supply is being absorbed at the current levels because this is an indication that all the weak hands who want to get out or who aren't confident of the months ahead probably want to sell.

Cement producer ACC dropped 2 percent as the company is going to pay 1 percent royalty for technology transfer to Swiss cement major Holcim (which holds 50.01 percent stake in ACC) on net sales from January 1.

Cigarette major ITC plunged 3.5 percent after FTSE lowered its free float weighting for the cigarette maker in its global equity index series, according to the web site of the index provider.

Shares of Sterlite Industries, Sesa Goa, IDFC, Reliance Infrastructure, Cipla and NTPC were down 1.5-3 percent. FMCG major Hindustan Unilever extended losses for the second consecutive session, losing nearly 2 percent.

Commercial vehicle maker Tata Motors remained top gainer, rising 4 percent after UK subsidiary Jaguar and Land Rover's sales increased 14 percent YoY to 29,893 units in November.

Shares of Bharti Airtel, Jindal Steel, Bajaj Auto and Siemens gained 1-2 percent.

Nifty trades below 5900, shrugs off Asia rally; ITC slumps

Indian equity benchmarks continued to remain in a tight range with a negative bias, despite positive cues from Asian markets. Nikkei is up nearly 2 percent as exporters are buoyed by a weaker Yen on mounting expectations that the Bank of Japan will implement more aggressive monetary easing.
 
At 12.20 hrs IST, the Sensex is down 22.36 points or 0.12 percent at 19332.90, and the Nifty down 1.75 points or 0.03 percent at 5886.25.

ITC slumped as much as 3.9 percent after FTSE lowered its free float weighting for the cigarette maker in its global equity index series, according to the web site of the index provider. The changes, which are effecting as of the close of trade on December 21, would impact passive trackers of FTSE indexes. Citigroup said in a note the change in free float weighting could lead to selling of 36 million shares in ITC, amounting to USD 200 million.

FTSE also increased Kotak Mahindra Bank's free float weighting to 35 percent from 33 percent and IndusInd Bank's to 49 percent from 24 percent.

ITC shares were down 3.7 percent as of 11:32 a.m., but IndusInd Bank gained 2.3 percent. Kotak Mahindra was down 0.2 percent.

Shares in Hindustan Unilever fell more than 2.5 percent, down for the second day, on concerns that it may face higher royalty payments to its parent Unilever PLC. Concerns came after Unilever Indonesia agreed on Wednesday to pay a higher royalty payment to the parent company.

Broadly, shares from the auto and realty sectors were in demand, while IT shares failed to build on Wednesday gains and were under pressure.

Meanwhile, Credit Agricole expects the rupee to strengthen to 52 a dollar by the end of 2013, with the currency trading at relatively attractive valuations in REER terms and having priced in "many of the fundamental problems it faces."

Key imbalances in India's economy, including the current account deficit, will gradually diminish next year, says the brokerage. However, risk-adjusted returns will be "less impressive" given the relatively high volatility in the USD/INR, it adds.

The rupee will also not benefit much from improvements in risk appetite given a "very low" correlation with risk appetite, Credit Agricole says.

The dollar rupee has been more sensitive to gyrations in the dollar, and Credit Agricole expects a gradual appreciation in the USD index over 2013 to constrain any strong rally in INR.

Sensex, Nifty flat; M&M Fin, Tata Motors lead early gainers

Key equity benchmarks were flat in early trade Thursday, as the market appears to be consolidating in a narrow band. (Pre-market cues)

The 30-share Sensex was down 2 points at 19,352 and the 50-share Nifty was up 2 points at 5890.

Brokers said while the IIP reading for October at 8.2% was way above market estimate, the economy may be still some time away from a meaningful recovery.

"As the current industrial slowdown is both well entrenched and broad based, it will take a while for industrial growth to recover. Therefore, we expect industrial output growth to remain at muted levels during the remaining months of this fiscal,'' rating agency Crisil said in a note to clients on the IIP number.

Dealers said liquidity continued to remain strong, and once the refunds from the recent IPOs came in, shares would rally again.

Motherson Sumi, M&M Financial Services, Tata Motors and Ashok Leyland led early gainers, rising 2-3%.

Broadly, shares from the auto and realty sectors were in demand, while IT shares failed to build on Wednesday gains and were under pressure.

And while key indices have been fluctuating over the last couple of weeks, Nifty December futures have been consistently trading at a 30-plus point premium to spot, indicating a bullish outlook on the market.