Sensex ends 333 points lower as FMCG shares drop; Nifty below 11,600

The benchmark Sensex tumbled 333 points, or 0.9 per cent, on Monday — its biggest drop in a month — following a sharp sell-off in Hindustan Unilever (HUL) and ITC. 

The 30-share index closed at 38,312, while the Nifty 50 closed at 11,582.35, down 98 points or 0.84 per cent. In the previous trading session, the indices clocked their sixth straight week of gains, during which they rallied six per cent.

Shares of HUL dropped 4.6 per cent, the most since October 27, 2014, as investors rushed to book profits following sharp gains this year. The stock has rallied 38 per cent from its March lows.  In recent weeks, a number of brokerages including Elara, Philip and CIMB had downgraded HUL on valuation concerns. The stock trades at one-year forward earnings multiple of 58 times. The consensus Bloomberg 12-month price target is Rs 1,716. 

The HUL stock ended at Rs 1,699, down Rs 82 over its previous close of Rs 1,781. ITC shares fell two per cent and the BSE FMCG index declined 2.14 per cent, its worst single-day fall in five years. Shares of Dabur, Britannia and Nestle fell over 2.4 per cent each. Analysts said the correction was on account of profit-booking on concerns surrounding expensive valuations and slower growth. 

Besides FMCG, performance of banking shares also weighed on the market. ICICI Bank and Axis Bank dropped over 2.5 per cent each, while State Bank of India was down nearly a per cent.  Only three of the 19 sectoral indices of BSE ended with gains. Among Sensex components, the advance-decline ratio stood at 1:2.

Market players say a correction was due following sharp gains over the past two months, during which the indices have rallied nine per cent.

"With a 1,000-point rally in the Nifty50, it's a good time to reassess where things stand," said Sunil Sharma, chief investment officer of Sanctum Wealth Management. "Global and macro concerns are worth monitoring; in particular, the depreciating currency and the potential for a rise in crude. EM outflows, Fed balance sheet contraction, Fed rate hikes remain headwinds," he added.