Profit taking drags Sensex 111 pts; Nifty holds 9300 on banks support, up 2% in week

Equity benchmarks extended losses for the second consecutive session Friday with the Nifty opening May series on a negative note. But, the week was quite strong for the market that rose 2 percent.

Profit booking in FMCG, technology, infra and HDFC Group stocks dragged the 30-share BSE Sensex below 30,000 level, down 111.34 points at 29,918.40.

The 50-share NSE Nifty was also down 38.10 points at 9,304.05 but managed to hold psychological 9,300-mark due to solid rally in PSU banks after Federal Bank earnings.

Experts expect further consolidation initially in the next week but they don’t see major fall in near term due to supportive domestic factors like earnings which have not disappointed so far, consistent DIIs investment when FIIs were net sellers and hopes of stable government.

The only factor that can spoil the party would be the issue between US and North Korea. If the fight between these countries intensifies then Nifty could fall below 9000 level.

Michael Hartnett of Bank of America Merrill Lynch says we at research house feels the bull market is unlikely to end until bullish macros make central banks tighten liquidity and we are not yet there.

Tushar Pradhan, CIO, HSBC Global Asset Management says, “Fiscal deficit is narrowing, inflation is coming down and reforms are on the anvil, which will make the country look better,”

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The broader markets continued to outperform benchmarks, with the BSE Midcap index rising 0.2 percent and Smallcap up 0.6 percent despite weak breadth, aided by PSU banks.

During the week, the market saw a record closing high but profit booking amid consolidation in later part of the week trimmed weekly gains. The Sensex gained nearly 1.9 percent and Nifty rose 2 percent.

PSU banks were stars today, with the Nifty PSU Bank rallying 3.44 percent after stellar earnings performance by Federal Bank in Q4 and hopes of early resolution to non-performing assets.

Federal Bank share price surged 13.6 percent as its profit jumped 25 times on solid improvement in asset quality and sharp fall in provisions. Syndicate Bank, Canara Bank, Union Bank, Allahabad Bank, IDBI Bank, Bank of India, Bank of Baroda, SBI and PNB surged 2.5-9 percent.

These stocks along with ICICI Bank helped Bank index also higher by 0.14 percent.

ONGC was the biggest gainer among Sensex stocks, rising nearly 4 percent. Motilal Oswal has upgraded the stock to buy from neutral with a target price of Rs 233 (implying 30 percent upside), citing positive policy developments, cost efficiency and dividend yield of 4-6 percent. After two years of negative EPS growth, the research firm expects company’s EPS growth at 31 percent in FY18 and 14 percent in FY19.

Auto stocks were also in focus today ahead of their April sales data due next week. Tata Motors, Hero Motocorp, Bajaj Auto and M&M gained 0.1-1 percent.

Maruti Suzuki was up 2.4 percent as analysts remained bullish on the stock after its earnings. Deutsche Bank has maintained its buy call on the stock with increased target price at Rs 7,000 (from Rs 6,500 earlier). It expects headwinds to be offset by volume growth & favourable price/mix and forecasts a FY17-20 volume/earnings CAGR at 10/14 percent.

Among others, ITC, HDFC Bank, HDFC, Reliance Industries and TCS were top five contributors to Sensex’ loss, down 1-2 percent on profit booking.

Global markets were mixed in trade today as investors concentrated on new earnings reports and geopolitical tensions.