Indices end winning run as global tensions, profit-booking take toll

The benchmark indices dropped 1.3 per cent on Monday — mirroring weakness in the global markets — after investors booked profits judging recent gains as excessive. Most global indices also traded weak as investors assessed the potential fallout of an impeachment inquiry of US President Donald Trump.  

The Sensex ended 504 points, or 1.3 per cent, lower at 38,594, while the Nifty declined 148 points, or 1.3 per cent, to close at 11,440. In the previous three sessions, the two had surged more than 8 per cent, buoyed by the reduction in corporation tax rates. Market players said some investors were taking money off the table as the tax cut would boost earnings, but a revival in the economy would take place with a lag. 

“Political uncertainty in the US amidst impeachment talks pulled indices lower. There was heightened selling was witnessed in state-owned banks,” said S Ranganathan, head of research at LKP Securities. The Nifty PSU Bank fell over 5.6 per cent, as the crisis at PMC Bank hurt sentiment and raised fresh fears of spiraling of bad assets on account of the pain in the realty sector. The SBI stock fell 7.7 per cent, the most among Sensex firms, reversing all gains made since the tax rate cut announcement. 

Bank of Baroda and Bank of India shares fell 6 per cent each.  Both domestic as well as overseas investors were net sellers on Wednesday, taking out Rs 342 crore and Rs 763 crore, respectively. 

In the previous two sessions, institutional investor had been strong buyers after market sentiment changed from bearish to bullish following the government’s move to lower taxes. 

Last week, the Sensex and Nifty had dropped to their lowest levels since February. However, with the stellar gains in three sessions, the Sensex had come just 3 per cent away from a new all-time high. “We prefer to remain cautious at higher levels. Indian benchmark indices are trading near peak valuations and sustainability at this level is essential,” said Ajit Mishra, vice-president (research), Religare Broking. Edelweiss said in a note that further gains in the market could be modest as the positive impact on the economic could only happen with a lag.