Profit booking drags Sensex 130 pts, Midcap outperforms; Idea dives 10% post Vodafone merger

The market lost ground on Monday, with the Sensex falling more than 100 points as investors preferred booking profits after a 2.5 percent rally in previous week and due to weak global cues.

The 30-share BSE Sensex declined 130.25 points to 29,518.74 and the 50-share NSE Nifty fell 33.20 points to 9,126.85. However, the broader markets outperformed benchmarks, with the Nifty Midcap rising 0.4 percent.

The profit booking was warranted after a rally in previous week, say experts who expect the market to consolidate for couple of days before getting traction to move towards record high. Huge inflow from FIIs since February indicated that uptrend is still intact.

With no major event lined up in near future, global cues will largely dictate our market trend, Jayant Manglik of Religare Securities says, adding Nifty has cushion at 9000 and upside also seems capped to 9300 in near term.

Traders should use this phase to gradually add quality counters and wait for the market to regain momentum, he advises.

Meanwhile, veteran financial commentator Udayan Mukherjee feels the Nifty could move higher from this point on strong momentum and liquidity.

“FIIs are late to the party as they were waiting for events such as elections and Federal Reserve actions to pan out. The USD 2 billion investment by FIIs in a week was a sign of serious commitment,” he says.

Nlesh Shah of Kotak Mahindra Asset Management Company says the recent buying is driven by a hope of (increase in) earnings growth and that is what is reflected in prices. He expects domestic institutional investors (DIIs), led by mutual funds, to be net buyers in 2017 of anywhere between Rs 75,000 crore to Rs 1 lakh crore.

Sectoral indices barring IT closed almost flat. The correction in top IT stocks pulled the index down over 1 percent. TCS, Infosys and Wipro were down 1.5-2 percent on concerns over H1-B visa and sharp appreciation in rupee recently.

Idea Cellular was biggest loser among Nifty stocks, down nearly 10 percent on profit booking after finally the company officially announced merger with Vodafone India. Vodafone will own 45.1 percent stake and Idea will hold 26 percent stake in the combined entity.

Reliance Industries, ICICI Bank and Axis Bank were other major losers, down 1.5-2 percent whereas HDFC Bank (up 0.6 percent), HDFC (up 0.5 percent) and ITC (up 0.3 percent) capped losses.

Some PSU banks gained strength on capital infusion. Dena Bank, IDBI Bank and Andhra Bank rose 2-4 percent.

Ajanta Pharma was up 1.5 percent after Motilal Oswal has initiated coverage on the stock with a buy rating and a target price of Rs 2,028, citing strong US growth.

At the time of writing this article, European markets were moderately lower as investors digested the potential impact that trade barriers could have on global growth.