Stocks end weaker as commodities firm up

Undertone remains optimistic for the moment as foreign institutional inflows are showing no signs of abating

Equity indices ended weak today, after swinging between gains and losses for most of the day as investors booked profits following a rebound in global commodity prices. Analysts said, however, the undertone remains optimistic for the moment, as foreign institutional inflows showed no sign of abating.  

The BSE Sensex ended down 51 points or 0.3 per cent from yesterday’s close at 19,939. The National Stock Exchange’s Nifty closed at 6,050.15, down 19 points or 0.3 per cent from its previous close. Both indices have gained almost eight per cent in a month.

“There was not much activity in the market, apart from some profit booking. There was a technical correction today, as commodity prices, mainly oil and gold, were up three to four per cent. But we expect them to fall and continue to be on the downside,” said G Chokkalingam, chief investment officer, Centrum Wealth Management.

The recent decline in commodity prices, particularly of gold and crude oil, have been well received. The lower prices are seen as improving the economy’s finances, particularly the current account deficit. Investors were hoping the Reserve Bank of India would cut rates in its recent policy meeting because of the fall in commodity prices but these hopes weren’t met to the extent of expectation.

Foreign institutional investors (FIIs) were net buyers during the day at Rs 662 crore. Domestic institutional investors (DIIs) continued to be sellers and sold shares worth Rs 476 crore, according to provisional data.  

With currencies being devalued, there is ample liquidity in global markets, say sources. Asian markets, particularly of India, have been the biggest beneficiary of FII flows. “The money flow into developing markets has gone up. Asian markets have moved up in terms of flows, with India receiving a disproportionately high share, into both equity and debt products, as the yields India offers are superior than the other markets. The fact that India is a major beneficiary of cooling commodity prices has helped, too,” said Gaurav Mehta, strategist with Ambit Capital.

However, marketmen said with the cooling in commodity prices, especially of gold, retail investors are expected to return, turning DIIs into buyers. On the BSE, retail were net sellers at Rs 7 crore.

Among the sectors, information technology (IT) stocks were up about one per cent, mainly on the back of good forecasts posted by Cognizant yesterday. “There was a bit of a rub-off effect on the sector as a whole. But the companies winning the higher number of deals are the ones with rising stock prices,”said Dharmesh Pancholi, deputy manager, Sharekhan Advisory Team. HCL Tech was the highest gainer at 2.6 per cent in the BSE IT Index, while Hexaware was a laggard, with the stock down 3.2 per cent.

On the NSE, the advance-decline ratio was 0.7 ,with 531 advances and 762 declines.

On the global front, Asian markets were down after weak Chinese inflation data, which was higher than expected.