Market falls in last-hour selling

FIIs pulling out coupled with lack of domestic buying support contributed to the decline

The stock market fell in the last hour of trading on Wednesday, owing to concerns over the stability of the government. Selling by foreign institutions and lack of domestic buying support contributed to the decline, said market mavens.

BSE’s Sensex fell 1.26 per cent, or 239.31 points, to close at 18,801.64. The National Stock Exchange’s Nifty closed at 5,672.9, down 1.31 per cent.

Eleven of the thirteen sectoral indices on the BSE ended with losses. The automobile index was among the major losers, dropping 2.23 per cent on expectations of weak sales figures, experts said. Indices tracking the metal, realty and capital goods sectors fell about two per cent.

Deven Choksey, managing director at K R Choksey Securities, said, “Advani’s statement on the possibility of early elections affected sentiment. Also, the government has not been executing, and this has affected sentiment.”

According to news reports, senior Opposition leader and former deputy prime minister L K Advani said elections could well happen this year.

Amish Munshi, head (portfolio management services) of Tata Asset Management, also blamed political uncertainty for the fall in the market. “What we saw towards the last hour of the trading session was nervousness brought on by the possibility of early elections this year,” he said.

Dealers said the fall was due to basket-selling by foreign institutional investors. Talk of a large domestic institutional player (which usually plays market saviour) not being too active on Wednesday was doing the rounds; this contributed to the decline. Foreign institutional investors were net sellers by Rs 368.39 crore, according to provisional exchange data. Domestic institutions were net buyers by Rs 37.74 crore.

Manish Sonthalia, vice-president and fund manager at Motilal Oswal Asset Management Company, said the market was fluctuating on the basis of immediate risk appetite — if sentiment was positive, buying was seen and if it was negative, there was unloading.

“Some negative sentiment could be because the market is still looking at the current account deficit figures…It is a risk-on, risk-off market,” he said.

The volatility index jumped 5.46 per cent, indicating investors were betting on sharper moves in the days ahead. “The results season would be closely watched as a possible trigger for the market,” said Sonthalia.

Sonthalia said he expected only information technology, pharmaceuticals and fast-moving consumer goods companies to report decent earnings, while overall, profit growth would be four to five per cent year-on-year.

“The mood in the market will be determined more by the coming results season, the monsoon forecast to be announced at end of this month and the Reserve Bank of India’s policy announcement early next month,” said Munshi.

Some sectors that saw declines might present buying opportunities, he added. “Sectors which declined the most---automobile, realty and capital goods---are all interest-rate sensitive and are expected to do better, with interest rates expected to come down in 6-12 months. Of these, the automobile sector would be the better play. The realty and capital goods sectors might take longer to recover,” he said.