Sensex logs first monthly loss of 2017, sheds 0.7%

This follows sharp 16% rally in first 5 month; now trades at 19 times its one-year forward earnings

The benchmark Sensex ended marginally higher on Friday, however, ended with month with negative returns. This is the first time this year that the index has logged a first monthly loss. Following a sharp 16 per cent rally in the first five months, the Sensex ended with 0.72 per cent decline in June.

On Friday, the Sensex added 64 points, or 0.21 per cent to close at 30,921.6, while the Nifty 50 index gained 16.8 points, or 0.18 per cent to close at 9,520.9. All broader indices including BSE Midcap index ended with gains even as investors remained cautious ahead of the launch of goods and services tax (GST).

The gains were led by consumer and pharmaceutical stocks, while automobile stocks ended with losses.

ITC gained four per cent to close at an all-time high level of Rs 324. Sun Pharma added three per cent and Cipla gained nearly two per cent. Meanwhile, Hero Motocorp fell more than a per cent, most among Sensex components. Tata Motors and M&M fell 0.8 per cent and 0.6 per cent respectively.

ITC gained as analysts said GST will have a neutral impact on earnings and would help drive up sales. Auto stocks fell on worries that GST will increase prices on hurt sales.

The GST will kick in from midnight Friday, marking India's biggest tax reform since independence, unifying its $2 trillion economy and 1.3 billion people into a common market.

"There is some kind of profit-booking and sideways consolidation in the market, so most sectors are volatile," said Siddharth Sedani, head and vice president, equity advisory at Anand Rathi.

Auto makers were among the top losers on worries that GST would push up prices of cars and lead to a decline in sales. The Nifty Auto index lost as much as 0.9 percent, with Tata Motors Ltd falling as much as 1.6 per cent.

"The nation is now waiting with bated breath the rollout of the much discussed indirect tax reform. In keeping with the current sentiment, stock markets too chose to trade with caution and hugged the flat line for most of the day. FMCG and healthcare stocks witnessed significant buying interest today while interest rate sensitive stocks like banking, auto and financial services traded under pressure," said Karthikraj Lakshmanan, senior fund manager - equities, BNP Paribas Mutual Fund.

InterGlobe Aviation, that operates IndiGo Airlines, fell six per cent after the company expressed interest in buying a stake in Air India after the government approved plans to privatise the debt-laden state-owned carrier.

Overseas investors bought shares worth Rs 160 crore on Friday, while domestic investors pumped in nearly Rs 1,200 crore, provisional data provided by stock exchanges showed.

The Sensex, following the 16 per cent rally this year, now trades at 19 times its projected one-year forward earnings, much higher than its long-term average of 16 times.