Thursday, August 5, 2010

Sensex sheds 44 points as bull run cut short by profit-booking

The BSE benchmark Sensex pared early gains to close 44 points down on Thursday as investors booked profits, apprehending that the bull run in the past three sessions has outpaced the corporate earnings outlook.

In volatile trade, the Bombay Stock Exchange’s 30-share index shuttled between 18,295.43 and 18,156.45 before ending with a loss of 44.61 points at 18,172.83.

The broad-based National Stock Exchange index Nifty fell by 20.75 points to 5,447.10, after touching the day’s high of 5,487.15 points.

The Sensex had gained nearly 350 points in the last three trading sessions to touch a 30-month high at a level last seen in February, 2008.

However, investors came to the conclusion that the recent rally has outpaced the outlook for earnings growth, sparking profit-booking, according to market analysts. The investors disregarded positive factors such as the fall in food inflation and progressing monsoon.

The most valuable firm, Reliance Industries, fell sharply despite the company’s announcement that it has bought a 60 per cent stake in a U.S.-based shale gas project.

Bucking the general weakening trend, information technology sector stocks continued their upward march after the rupee fell further, raising hopes of better earnings by these companies. Over 50 per cent of software exporting companies’ revenue comes in dollars from the U.S. and European markets.

In the 30-BSE index components, 11 stocks gained, while 19 ended with losses. The refinery, healthcare, power, metal and banking sector turned weak, while a better trend in IT, realty and auto sector saved the market from a major fall. In addition, positive trends in Asia and Europe also cushioned the Sensex from a major dip.

The interest of investors shifted to small cap and mid cap stocks for a better return with small investments. The small cap index gained 0.47 per cent to 9,561.25 and the mid cap index by 0.05 per cent to 7,522.30.


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