Sensex ends 6-day rally

Markets may resume rally thanks to ECB stimulus

The Indian market on Thursday ended its six-day gaining spree, with the benchmark Sensex ending 170 points, or 0.7 per cent lower at 24,623.34. The market fell on profit-taking as some investors judged the longest winning streak in nearly five months as excessive. In the previous six sessions, the Sensex had added nearly eight per cent, or 1,800 points buoyed by improvement in global risk appetite and reversal in foreign outflows.  Market players expect the Indian market to resume its upward momentum on Friday thanks to the stimulus package announced by the European Central Bank (ECB) after the close if Indian markets. ECB President Mario Draghi cut all its interest rates and expanded its monthly bond purchases by a third as strives to fend off the threat of euro-area deflation. European markets soared between 1 per cent and 5 per cent following the ECB announcement. Meanwhile, oil prices gained, while gold prices and bond yields softened, indicating an increase in risk appetite.

The latest policy measures by the ECB are likely to improve the liquidity situation and potentially trigger a rally in risky assets, said experts.

Read more from our special coverage on "SENSEX"

• Top seven companies add over Rs 1 lakh cr in market valuation
• Sensex caps biggest weekly gain since 2011
• Market betting on short-term gains for banks
• Markets to remain volatile ahead of F&O expiry
• Nifty sinks 125 points as Budget session begins

Indian markets have already seen a sharp reversal in foreign institutional investor (FII) outflows. After pulling out nearly $2.8 billion from the Indian markets till February, FIIs have invested around $1.2 billion in domestic stocks this month.

On Thursday, overseas investors bought shares worth Rs 1,063 crore, while domestic investors’ net-sold shares worth around Rs 600 crore, provisional data showed.

“The market capped the winning streak as anxiety over ECB policy meet led to profit booking.  The ECB is expected to provide a stimulus and as per the size of the QE, it will generate a positive impact in the sagging economy,” Vinod Nair, head-fundamental research, Geojit BNP Paribas Financial Services said ahead of the ECB announcement.

The fall in the market on Thursday was led by Infosys, Reliance Industries and Bharat Heavy Electricals (Bhel). Infosys fell 2.8 per cen, most in about two weeks, after two of its founders sold shares in the company. India’s biggest power-equipment maker Bhel dropped 3.1 per cent to a one-week low, while Reliance Industries declined the most in a month.

The six-day rally had pushed up the Sensex’s 14-day relative strength index (RSI) to 62 on Wednesday, approaching the 70 level that signals to some traders a security is overbought.

The Sensex has declined 5.7 percent this year and is valued at 15.1 times its 12-month projected earnings, higher than its three-year average of 14.7 times.