Sensex fails to hold 165-pt rally, Nifty still above 9600; Fed meet eyed

Equity benchmarks as well broader markets erased all gains in late trade and ended on a flat note Tuesday, but the Nifty managed to hold its psychological 9,600-mark ahead of Federal Reserve meeting starting today.

Benchmarks recouped previous session’s losses intraday, with the Sensex rising as much as 165 points, especially after lower CPI inflation (2.2 percent in May) and unexciting industrial output growth (3.1 percent in April) raised hopes for a rate cut in August policy meeting or earlier. However, traders preferred to book profits in late trade on caution ahead of two-day Federal Reserve policy meeting.

The 30-share BSE Sensex was up 7.79 points at 31,103.49 while the 50-share NSE Nifty fell 9.50 points to 9,606.90 despite positive global cues.

Even the market breadth that was in favour of advances with 3:1 ratio in morning also turned negative. About 1,342 shares declined against 1,325 advancing shares on the BSE.

“One must tread with caution at this point. Among mid and small caps, too, one has to be cautious,” Harsha Upadhyaya, CIO-Equity at Kotak Mutual Fund said, after the market rallied 17 percent in current calendar year.

Even as liquidity keeps flowing, the pace of earnings recovery is still very gradual, he feels.

Jayant Manglik, President of Retail Distribution at Religare Securities, said the markets have largely discounted the rate hike by the US Fed this time. Its commentary would be key, he feels. He suggests keeping hedged positions on stock despite prevailing uptrend in the benchmark index.

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However, global markets were higher ahead of Federal Reserve meeting. France’s CAC and Germany’s DAX were up half a percent each at the time of writing this article. Asian markets – China’s Shanghai, Hong Kong’s Hang Seng, Australia’s ASX 200 and South Korea’s Kospi also closed 0.5-1.7 percent higher.

Majority of economists globally expect the Federal Reserve to hike interest rate by 25 basis points in June meeting.

Back home, technology, auto and select banks stocks, were under pressure while HDFC Group stocks supported the market.

Wipro dropped 1.44 percent after the stock adjusted for bonus issue in the proportion of 1:1. The stock started trading ex-bonus today.

TCS and Tata Motors were leading contributors to Sensex’ losses, down 1.5 percent each followed by Reliance Industries, Infosys, ICICI Bank, SBI and Maruti Suzuki.

However, Sun Pharma gained 0.6 percent on getting approval from the USFDA for generic Zetia tablets that are used to lower cholesterol in blood. Lupin was another gainer among pharma stocks, up 1.7 percent.
HDFC Group stocks ended at record closing high, with housing finance company HDFC up 1.5 percent at Rs 1,668.45 and HDFC Bank up 0.5 percent at Rs 1,677.50.