Profit taking post 1-yr high drags Sensex 145pts, Nifty sub 8900

Equity benchmarks reversed all morning gains in last couple of hours of trade, weighed by profit booking after hitting a fresh 52-week high in opening trade Thursday. Positive Asian & US cues pushed the market near 9000 level in opening but as the day progressed, investors booked profits on caution ahead of assembly elections results next week & expensive valuations.

After a swing of 361 points, the 30-share BSE Sensex closed below 29,000 level, down 144.70 points at 28,839.79. The 50-share NSE Nifty ended tad below psychological 8,900-mark, down 46.05 points at 8899.75, dragged by banking & financials, FMCG and pharma stocks.

The broader markets underperformed benchmarks, with Nifty Midcap and Smallcap indices falling around 1.5 percent. About three shares declined for every share rising on the exchange.

“It is a normal profit taking which may extend further; however, the downside also seems capped,” Jayant Manglik of Religare Securities says.

At the same time, stocks may witness volatile swings during the consolidation phase so traders should remain extra cautious in stock selection and focus on trade management, he adds.

Dilip Bhat of Prabhudas Lilladher says the market will continue to look very expensive unless and until the confidence comes back by way of earnings.

Tata Motors bucked the trend, up 2.66 percent following growth in domestic and JLR US sales in February. While reiterating a buy call on the stock, Bank of America Merrill Lynch has raised its target to Rs 580 from 560 on higher volume estimates. As recovery becomes visible Q2FY18 onwards (EPS CAGR of 21 percent FY16-19), it expects the valuation multiples to expand as well.

Bajaj Auto gained 2.12 percent after February sales increased to 2.73 lakh units from 2.72 lakh units in year-ago month, driven by exports. However, S Ravikumar, President (Business Development) of the company says the demonetisation impact has not fully subsided and two-wheeler companies might continue to feel the pain for a few more months.

Hero Motocorp also rose 1.4 percent as its two-wheeler volumes’ fall was lower than analysts’ estimates. This was largely due to only 5 percent drop in February sales YoY as compared to a 13.5 percent decline in January, impacted by demonetisation.

Dr Reddy’s Labs lost 2 percent. Credit Suisse has underperform rating on the stock as it is wary about high product concentration at company playing out, which could impact its earnings per share (EPS) for FY18 and market share.

Cadila Healthcare fell 1.7 percent as the US Food and Drug Administration (FDA) issued three observations under Form 483 for its formulations manufacturing facility at Baddi.

IndusInd Bank shares declined 1.4 percent after sources told CNBC-TV18 that the Hinduja Group-controlled company, which was exploring the option of acquiring a stake in Bharat Financial, and subsequently a merger, has called off the deal due to valuation concerns. Bharat Financial dropped nearly 3 percent.

ITC, Adani Ports, SBI, Sun Pharma, Mahindra & Mahindra, Axis Bank and Bharti Airtel among others were down 1-3 percent.

At the time of writing this article, European markets were hovering around the flatline as investors took a breather after a strong rally on Wall Street. Asia ended mixed after morning rally led by US cues.