Premium valuation discomfort triggers profit booking

Hyderabad: Benchmark indices, BSE Sensex and NSE Nifty, took a quick U turn on Friday as they nosedived by over 1.3 per cent breaking down the three support levels as traders and speculators resorted to heavy profit booking in index heavyweights RIL, L&T, HDFC Bank, and Airtel, etc. BSE Sensex tanked by 1,627.85 points or 1.6% from intra-day’s high of 75,095.18 points to the session’s low of 73,627.99, while broader Nifty-50 tool tumbled by 289 points, hitting the day’s low of 22,358.65 points. All sectoral indices were trading lower.

The 30-share BSE Sensex finally dropped 732.96 points or 0.98 per cent and settled at 73,878.15 after soaring 484.07 points earlier in the day. NSE Nifty also declined 172.35 points or 0.76 per cent to 22,475.85 points. The benchmark hit a record 22,794.70 in the early trade, up 146.5 points or 0.64 per cent. The market capitalisation (mcap) of BSE-listed companies eroded by Rs2,25,543.41 crore to Rs4,06,24,224.49 crore (Rs406.24 lakh cr or $4.89 trillion). The mcap on BSE fell by a whopping Rs4.25 lakh crore in intra-day session when Sensex tanked 1,627.45 pts to the day’s low of 73,467.73.

Analysts attribute major reasons for the blood bath on the bourses to recent record highs as Sensex and Nifty moved up by over 4.5 per cent from their recent lows in the last two weeks. Further, majority Asian indices were trading lower.

“Profit-booking and a degree of caution ahead of the release of the US non-farm payroll resulted in selling pressure in the market. However, the absence of significant negative surprises in Q4 earnings thus far, along with a decline in oil prices, might help to mitigate the downside. "Though the correction was broad-based, the large-cap stock was the key underperformer due to the moderation of FII's exposure to the domestic market,” said Vinod Nair, Head (Research), Geojit Financial Services.

Perhaps, the domestic markets are losing steam to go further upward as they rose to record highs during the last six months on hopes of BJP's third term in power, observe analysts. Sensex was trading higher at 75,046 points in the first hour of trading, near to its all-time high of 75,124 points. Its counterpart, NSE Nifty rose to a fresh life-time high at 22,795 points, but tumbled to a low of 22,455points, down 340 points in intra-day deals.