Capital Goods shares drag markets; Sensex below 25,900

Markets continue to trade weak amid selling pressure in capital goods major L&T

Markets continued to remain weak in noon trades on Wednesday as gains in select index heavyweights failed to offset sharp sell-off in capital goods major Larsen & Toubro. Further, traders have turned cautious ahead of the July derivative contracts tomorrow and the policy decision by the US Federal Open Market Committee's two-day meet which ends later today.

At 1:20PM, the 30-share Sensex was down 104 points at 25,887 and the 50-share Nifty was trading 32 points lower at 7,716.

The Indian rupee was trading lower at 60.19 compared to its previous close of 60.12 because of dollar month-end dollar demand from crude oil importers. Further, the weakness in domestic equities also weighed on sentiment.

Asian markets were trading mixed ahead of key US economic data and the two-day US FOMC meet which ends today. Japanese shares gained for the fourth straight session to end with marginal gains as better-than-expected corporate earnings helped offset sluggish industrial data. The benchmark Nikkei ended up 0.4% at 15,646.23. The Shanghai Composite was marginally down 0.1% while Hang Seng was up 0.3%. Singapore's Straits Times was trading flat with negative bias.

European shares were trading weak in early deals as the US and the European Union imposed fresh sanctions against Russia. The CAC, DAX and FTSE were down 0.1-0.5% each.

The BSE Capital Goods index was the top loser among the sectoral indices down 5.2% followed by Metal, Power, Realty, Auto, Oil and Gas. Defensive shares were among the gainers with Healthcare and FMCG indices up marginally by 0.2-0.4% each.

Engineering major L&T was the top Sensex loser down 7.4% contributing the most to the Sensex losses. The company reported a consolidated net profit of Rs 967 crore for the quarter ended June 2014 (Q1), mainly on account of one-time gain of Rs 249 crore on disinvestments and stake sale in one of its project. The company had reported a net profit of Rs 459 crore in the corresponding quarter of last fiscal and Rs 2,840 crore in March quarter. Meanwhile, state-owned BHEL was down 1.2%.

Tata Motors extended losses and was down 2% after its overseas arm Jaguar Land Rover reduced its prices on three of its high end models in response to an pricing and anti-monopoly investigation in China. Prices of the Range Rover V8, Range Rover Sports V8 and Jaguar F-Type will be reduced by an average of 200,000 yuan (Rs 20.4 lakh) from August 1. Every fourth car made by Jaguar Land Rover is sold in China, the Business Standard report suggests.

Among other Sensex shares, Reliance Industries, SBI, HDFC and Sesa Sterlite were down 0.8-2.5% each.

Bharti Airtel was the top Sensex gainer up 4.7% after reporting 61% year-on-year jump in consolidated net profit at Rs 1,108 crore for the first quarter ended June 30 2014 (Q1), backed by a 74% rise in mobile data revenue. Further, the company on Monday said it has crossed 300 million customers mark across its mobile, fixed line, DSL and DTH services.

ITC was up 1.3% after its cigarette business’ revenues grew 18.8% year-on-year (yoy) to Rs 4,201 crore and Ebit (earnings before interest and tax) margin up 142 basis points to 64.8% for the quarter ended June 2014 (Q1). The country’s largest cigarette maker reported a better-than-expected 25% yoy rise in quarterly sales at Rs 9,160 crore during the quarter under review against Rs 7,339 crore in June 2013. The sales growth during the quarter was highest since March 2010 quarter.

Dr Reddy's Labs was up 1.6% ahead of its results later today.

The broader market was also trading weak with the BSE Mid-cap index down 0.4% and the Small-cap index down 0.6%.

Market breadth continued to remain weak with 1,642 losers and 978 gainers on the BSE.